Borrowing on margin to purchase rental property under multi-member LLC

[jmeltzer]

With interest rates rising, I am considering borrowing money from my brokerage on margin to purchase a rental property. The property would be owned by a multi-member LLC of which I am one of the members.

I understand that I can deduct margin interest if the money is used for investments in my own name. However, in this case I'd want the margin interest to be a deduction for the LLC, not myself (much as the interest on a traditional mortgage taken out to purchase a rental property would be deducted from the business's income.) Can this be done?

[DianeW777]

The best action to allow the LLC to deduct the interest is to create a loan or plan agreement with the LLC.  They should pay you as a reimbursement which would allow them to write off the interest on the LLC return. Check with your legal advisor to be sure of the best method.

Any time there is more than one member they should develop an accountable plan so that expenses are reimbursed by the LLC which in turn allows the LLC to deduct the expenses directly attributable to the LLC.

• IRS Publication 463, (page 29)

@jmeltzer 

[Edited: 04/14/2022 | 2:02p PST]