Is the interest paid on the whole life insurance policy loan deductible as investment interest if proceeds were used for investment?

[d-gilbert84]

I used the proceeds from a whole life insurance policy loan to invest in real estate. The policy was paid up and cashed in and the cash surrender value was reduced by the accrued interest on the loan.  1. Since the proceeds of the loan were used for investment is the interest deductible as investment interest?  Is the loan interest added to basis to reduce the taxable portion of the gain on the 1099R?  Would the answer change if a separate check was used to pay the interest expense?

[TomD8]

No.  Interest on a life insurance loan is not deductible unless the covered individual is a "key person".  See this IRS reference for details:  https://taxmap.irs.gov/taxmap/pubs/p535-014.htm

[sean2]

What you took a loan from your whole life insurance policy and invested the loan into a business or real estate. Could you deduct the interest that you repay?

[ScruffyCurmudgeon]

No, as said above.  The loan is on the policy life payment, not the business.

[baceved0]

I don’t think the previous answer is correct. If the policy holder takes a loan and then loans the money to their business and the business pays back the loan to the policy holder with interest. Then the interest is tax deductible.  

so the net is that you can take a loan from a life insurance policy and deduct the interest as business expense.