Posted by Frank Chin on February 28, 2004 at 17:19:02:
Gil:
This was answered recently to a similar question, by Diane, a CPA, in a post further down. Refer to:
http://www.pkftexas.com/index.cfm/p/103/nid/38
I used a HELOC to finance certain business activities. But in reading the article, it seems that proceeds from a mortgage can also be allocated to business interest as well.
Frank Chin
Need Tax Advice - Posted by Gil Broitman
Posted by Gil Broitman on February 27, 2004 at 11:21:00:
I need advice on how to set up the repayment of loan for an investor. We are purchasing, too hold, a property using refinance money from his home. What is the best way to do this? Is there a way for the business, this property, to pay his loan and take tax credits for the interest? Can he take the tax credit personally, again it’s a refi off his residence? He’s in the highest tax bracket and any income produced by the property will be taxed at the maximum rate. I’ve read in many places that passive income is taxed at a 20% rate, yet my accountant states otherwise, is this true? Please help. My percentage has gone to nothing in this property because of the repayment of his loan.
Any suggestions are greatly appreciated!
Gil Broitman
212-307-6260 x104
gil@gnvmanagement.com
Re: Need Tax Advice - Posted by IP
Posted by IP on March 01, 2004 at 24:42:18:
First, How is your business set up with your friend? Second, the interest on his refinance is totally deductible on Schedule A of his tax return.I will try to answer this based on the info i have. It sounds like your investment home is under his name totally, You write that your income from this home will be taxed at the his tax rate(THE MAXIMUM RATE). If this is the case than the income will be taxed at the max rate. But in the case of your rental property he is allowed to depreciate the property, use against income any repairs, insurance, supplies, mortgage int and taxes. Many times all these expenses result on a loss on The SCHEDULE E of his tax return. This is very beneficial to him. Again all this depends on how everything is set up.