QUESTION:
Hi David,
I've sent similar question under the "Investment" section; sorry if it's
spamming you.
---------------------------------------
I have a 50'000 which I own on my LOC (and which is fairly to say "gone with
a wind"(I have not put it into any investment but I lost them)). Now I have
30'000 (my own money). And I can put some money aside every month, which can
be used towards paying those debts.
I'm planing to do an investment now, most likely into Real Estate. And my
questions is:
- What would be the best option in my case:
a) Use my money to pay off part of my debts, and then borrow again from
the LOC for an investment?
b) Invest my own money and trying to pay debts using whatever I can save
off my salary + whatever I'll get from investment?
c) Use my own money + whatever I'll save off my salary into investment and
pay my debts off with whatever will come out of investment?
Thanks in advance,
------------------------
DAVID INGRAM REPLIES:
There is a bit of a language problem here but I think I get the question.
1. If you spent the $50,000 from the line of Credit (LOC) on investments
and the investments are gone with the wind, then the interest you are paying
on the LOC is deductible on line 232 of your Canadian Income Tax return.
2. If the $50,000 was spent on personal items which are gone with the wind
(reminds me of a free flight model airplane I built in Winnipeg when I was
12. I put too much gas in it and watched it "go with the wind"), then the
interest on the $50,000 is NOT deductible and you should take whatever cash
you have and pay down the LOC and take whatever other money you can put
together from your job and pay it down first. Remember to take the earnings
from any investment and pay down the non-deductible debt as well and then
borrow on your new equity to buy any amounts you would normally reinvest as
in a mutual fund.
If situation "1" is the case, then it really does not matter what you do in
terms of the order. The debt you already have is deductible and anything
you borrow for investment will be deductible as well.
You can get a better idea by going to www.centa.com - click on newsletters
in the top left box and then click on 2001 and then click on November for 11
pages of information about making interest deductible.
If you happen to live in Vancouver, you should also come out to one of our
Thursday Night Seminars. I am at most of them but will NOT be at the Oct
6th seminar because of dental surgery that day.
Every Thursday Evening, Fred Snyder of Dundee Wealth Management conducts
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No cost - no obligation
Topics always cover mortgage interest as a deduction
other topics - getting the mortgage, estate planning, critical care
insurance, income taxation, differences between stocks and bonds, and
usually the most innovative HELOC mortgage offered in Canada from Manulife
Bank
Answers to this and other similar questions can be obtained free on Air
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