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Interest Tracing Help
Hey all,
I've struggled to understand interest tracing and even after re-reading the IRS documents I am still pretty fuzzy and hoping to find some guidance from this community. How would interest tracing work in this scenario:
1. A while back my wife and I did a cash out refinance (Loan A) of a condo (Investment Property A)
2. We used all the refi cash from loan A towards a portion of the down payment on an **owner occupied** multifamily (Investment Property B)
3. We recently cash out refi'd Investment property B (Loan B) and now that money is just sitting in it's own separate bank account.
4. We are about to use the cash from Loan B to invest in more real estate (our own as well as other people's syndicated deals). We are also considering using the funds to buy some gold as a hedge.
My understanding is that I can deduct 100% of the interest from Loan A, and Loan B as long as I keep the funds I received from Loan B separate from our personal funds and only use them for other investing activity, is that right?
-Are there any other limitations on how I invest Loan B that could impact my ability to deduct the mortgage interest?
-Would there be a way to purchase gold using Loan B funds without harming my ability to deduct the interest?
-My wife and I deposited the Loan B refinance funds into a newly created bank account that is in our personal name, any issue there?
Anyone have any experience or pointers on this?