Required: For the current tax year, discuss the deductibility of the interest payments, as well as the deductibility of the fees that were payable (citing authority ) . Damien owns a residential investment property that was unmortgaged. He agreed with the bank to borrow $400,000 with the investment property as security for the loan. This loan had a term of 30 years, and the loan set up costs, paid on 1 July of the current tax year, were $3000. Of the $400,000, $200,000 was used to buy shares listed on the stock exchange. He also used the other $200,000 to buy a new Porsche (for personal use). Total interest on the $400,000 for the tax year was $20,000. During the current tax year, Damien also borrowed another $2 million to buy a new investment property (a commercial premises which Damien rents out) which is secured by that commercial property. On 20 June 2024 (in the current tax year), Damien prepaid 3 years of interest on the commercial property loan -- specifically, he paid $300,000 interest on the loan to cover the period of 20 June 2024 till 19 June 2027.
Required: For the current tax year, discuss the deductibility of the interest payments, as well as the deductibility of the fees that were payable (citing authority ) .
Damien owns a residential investment property that was unmortgaged. He agreed with the bank to borrow $400,000 with the investment property as security for the loan. This loan had a term of 30 years, and the loan set up costs, paid on 1 July of the current tax year, were $3000. Of the $400,000, $200,000 was used to buy shares listed on the stock exchange. He also used the other $200,000 to buy a new Porsche (for personal use). Total interest on the $400,000 for the tax year was $20,000.
During the current tax year, Damien also borrowed another $2 million to buy a new investment property (a commercial premises which Damien rents out) which is secured by that commercial property. On 20 June 2024 (in the current tax year), Damien prepaid 3 years of interest on the commercial property loan -- specifically, he paid $300,000 interest on the loan to cover the period of 20 June 2024 till 19 June 2027.
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