Ida Ross has decided to purchase a new home in a retirement community for $400,000. She has $50,000 in cash for the downpayment but needs to borrow the remaining $350,000 to finance the purchase. Her financial adviser, Marc, suggests that rather than seeking convential mortgage, she should borrow the funds from State Bank using her portfolio of appreciated securities as collateral. Selling the securities to generate $350,000 in cash would lead to a substantial tax on the capital gain recognized. Therefore, a better strategy would be to borrow agaisnt her securities and then claim a deduction for the interest paid on the loan. How do you react to the financial adviser\'s strategy? Please include reference.
Solution
thats an very wise choice by getting an loan funded by securities (laon against shares) . as ida can get finnace for home easily. her investmment rremain intaact without selling them . where she can claim substantial tax on capital gain recognized.
http://financialservicesinc.ubs.com/staticfiles/faw/adobe/all/Lending_Circular.pdf (for ref purpose)
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Ida Ross has decided to purchase a new home in a retirement community.docx
1. Ida Ross has decided to purchase a new home in a retirement community for $400,000. She has
$50,000 in cash for the downpayment but needs to borrow the remaining $350,000 to finance the
purchase. Her financial adviser, Marc, suggests that rather than seeking convential mortgage, she
should borrow the funds from State Bank using her portfolio of appreciated securities as
collateral. Selling the securities to generate $350,000 in cash would lead to a substantial tax on
the capital gain recognized. Therefore, a better strategy would be to borrow agaisnt her securities
and then claim a deduction for the interest paid on the loan. How do you react to the financial
adviser's strategy? Please include reference.
Solution
thats an very wise choice by getting an loan funded by securities (laon against shares) . as ida can
get finnace for home easily. her investmment rremain intaact without selling them . where she
can claim substantial tax on capital gain recognized.
http://financialservicesinc.ubs.com/staticfiles/faw/adobe/all/Lending_Circular.pdf (for ref
purpose)
