2. T borrowed $100,000 by margining securities in T's brokerage account. T used the loan proceeds to provide inventory for T's retail business (conducted by T's wholly-owned limited liability company that is disregarded for federal income tax purposes). (a) Is the interest T pays on the loan deductible and, if so, is it subject to the limitations on taxable investment interest? Explain your answer. (b) How would the answer to (a) change if T used the loan proceeds to finance a vacation trip around the world? How would the answer to (b) change if T borrowed the funds from a bank and the bank took a security interest in all of the assets of the limited liability company

Answer rating: 100% (QA)

Answer a Deductibility of Margin Interest Interest is not deductible The interest T pays on the loan ... View the full answer