Box spreads have come up a lot on this forum as a way to borrow funds.
The pro is that the rate is cheaper than margin.
The con is that selling a box spread generates a 60/40 long term/short term capital loss, which can only offset capital gains, while paying margin interest results in investment interest expense that can offset all investment income (such as dividends).
However, there appears to be another difference that I haven't seen discussed.
Let's say you withdraw cash on margin and directly purchase a car with the proceeds. In that case, the investment interest expense is not deductible.
But if you do this and then sell a box to pay back the margin, do you retain a capital loss that can still offset capital gains? If so, isn't that another pro? If not, what is the authority that disallows this, and what rules govern the determination? The interest tracing rules seem specific to interest expense.
The pro is that the rate is cheaper than margin.
The con is that selling a box spread generates a 60/40 long term/short term capital loss, which can only offset capital gains, while paying margin interest results in investment interest expense that can offset all investment income (such as dividends).
However, there appears to be another difference that I haven't seen discussed.
Let's say you withdraw cash on margin and directly purchase a car with the proceeds. In that case, the investment interest expense is not deductible.
But if you do this and then sell a box to pay back the margin, do you retain a capital loss that can still offset capital gains? If so, isn't that another pro? If not, what is the authority that disallows this, and what rules govern the determination? The interest tracing rules seem specific to interest expense.
Statistics: Posted by johnanglemen — Thu Dec 28, 2023 12:15 pm — Replies 1 — Views 64