@Love2Bike wrote:
Ok, so back to my original question, I took out $250k from HELOC, lent it all to someone for HELOC+X% all traceable via wire transfers, got repaid back via wire, closed my HELOC fully. Then based on what you wrote I only owe taxes on X% interest and not HELOC+X%.
You are combining two things in a very strange way.
If you buy an investment with a loan, the investment income is taxable to you (interest, dividends, or capital gains). You can deduct the interest on the loan up to the amount of investment income you report.
If you loan money to someone and they repay you with interest, the interest is taxable income to you. But if you loan someone money and they buy an investment, then you only have a loan transaction. What the borrower does with the money has no effect on your tax return. (Investing in someone's business is different from the tax point of view than loaning them money personally.)
So did you buy an investment or loan someone money?
