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I pay 4.9% for a margin on old XOM stock. My question is if

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I pay down all or...
I pay 4.9% for a margin on old XOM stock. My question is if I pay down all or part of the margin, will I still encounter large tax consequences or have I offset these tax concerns somewhat over the past years of the margin.
Submitted: 7 years ago.Category: Tax
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11/1/2010
Tax Professional: Jacy, Certified Public Accountant (CPA) replied 7 years ago
Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience: Nine years individual income tax preparation and consulting
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Hello,

 

Repayment of a margin loan does not have any tax consequences except that you will no longer have deductible investment interest. You will not report a gain or loss on your XOM stock until it is sold.

 

I hope this has been helpful to you.

 

Thank you!

 

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Customer reply replied 7 years ago

The difference in the margin cost at 4.9 and the XOM stock dividends at $1.76 seems to be a negative disparity. If so and the stock were to be sold to pay margin and cost, would there be a deductable tax loss. Certainly no taxable gain?

Tax Professional: Jacy, Certified Public Accountant (CPA) replied 7 years ago

The amount borrowed on margin does not affect the cost basis, nor do dividends received unless you reinvested (purchased more shares). The difference between the original cost of the stock and the proceeds when you sell determine the reportable gain or loss.

 

Thanks again for the question. Let me know if I can be of further assistance.

 

 

 

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Customer reply replied 7 years ago

I have property in TN that is underwater by around $70,000 If I renege on the mortgage is that 70 a deductable loss?

Tax Professional: Jacy, Certified Public Accountant (CPA) replied 7 years ago

Hello,

 

The gain or loss on a foreclosed property depends on whether you will be held personally liable for the amount of unpaid mortgage.

 

If the mortgage is non-recourse (meaning you will not be held liable), then the amount of debt canceled is considered your amount realized. This amount minus your cost basis in the property is your gain or loss on the foreclosure.

 

If you do have a loss, it's deductibility depends on the character of the property. Business use property loss is generally deductible. Personal use is not. If it is investment property, you will have a capital loss, which is limited.

 

I hope this has been helpful to you.

 

Thank you!

 

Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
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