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Question 2 of a three part question
If I withdraw money from a line of credit (LOC) and put this money down on property that hasn't been built yet, but it will be used for rental income when completed next year, can I write off the interest from the LOC on my income tax?
i.e. is this interest deductible now or do I have to wait till rental
income comes in or does it even apply at all?
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david ingram replies:
If the interest was for a commercial rental, the interest would have to be capitalized.
If the interest was for the purchase of a vacant lot, there is a question about whether it can even be capitalized with tax cases going both ways.
If the interest was to buy gold, there is a good case saying it can NOT be capitalized.
However, the providing of rental income has an exception for interest paid while under construction. You can deduct the interest.
This was one of the ingredients of "soft costs" in the heyday of the MURB sales.
david ingram
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
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