My total net gain from my margin account is 10k for 2006. IRS asks me to report this as part of my gross income. My real cost for making margin trades besides brokerage fees include margin interest and the total for 2006 is 1k. This cost is not reflected on the numbers that are provided by my brokerage to the IRS. Using my monthly statements, i can add the applicable margin interest to the cost of each transaction so that in total, my net gain for the year would be 10k-1k = 9k. Has anybody done this and is this legal? IRS tells me that i can only report the interest cost as a deduction which i may not be able to use if i take the standard deduction. This seems patently unfair. Does anybody know if there is any other way to report the margin interest so it reduces my gross income?
2007-02-26 02:17:40 · 3 answers · asked by golfingjake 1 in Business & Finance ➔ Taxes ➔ United States
No, you must deduct interest for investments as an itemized deduction. It is only deductible to the extent of the investment income, and only deductible if you itemize your deductions.
Maybe it's "unfair," but it IS the law.
2007-02-26 02:40:03 · answer #1 · answered by Bostonian In MO 7 · 2⤊ 0⤋
The IRS is correct. There is no other legal way besides itemizing deductions. Fairness and logic have little to do with tax law.
2007-02-26 02:25:05 · answer #2 · answered by spicertax 5 · 0⤊ 0⤋
Your margin expenses are not transaction expenses. They are investment expenses deductible on Schedule A.
You can deduct brokerage fees and commissions, not interest expense, on your stock trades.
2007-02-26 02:23:05 · answer #3 · answered by ninasgramma 7 · 1⤊ 0⤋