Investment Interest Expense

[Diane]

Client borrowed money from brokerage account to loan to grocery store that is now owned and run by his sons. The client is no longer a shareholder. Don't know if the loan will ever be paid back. Client wants to claim the interest on the loan as investment interest expense. Is the interest deductible if it's a loan to the store? Could this interest be deducted if the money was used as a Capital Contributioin?

Diane

[Terry D EA]

If your client is no longer a shareholder, did the others buy him out? How did they part ways? If this was treated as a loan from a shareholder, I don't see how it is determined as non collectible if the business has assets and still exists. A lot of additional information is needed here to try to answer your question.

[michaelmars]

IS the grocery paying him interest, is this a business loan or personal to his kids?

[mcb39]

Here is one for all of you. I have a new client who cashed out a $110,000 IRA to invest the money in her boyfriend's trucking business. Does anyone see any deductions here as per the penalty, etc. The only thing I could figure out to do was create a Partnership Return for them so that she can at least take half of the loss. He has been a client of mine for many years but this is his first year of driving his own rig OTR. I told her that since she consulted me, I have to do whatever I can to protect her interests. They have good faith agreements, supposedly in writing. They will both agree to whatever I advise. I prepared an amortization schedule, but where do I deduct the interest? I am thinking on the Partnership, but then she should have to claim it as income and with an $11,000 premature penalty, she has too much income already. She is 50; cannot find any exception to the penalty for her. Guess Love really is Blind!