Tax-aware long/short interest expense probably isn't deductible
It is limited to net investment income (NII) which short-term capital losses floor
AQR’s latest clarifies (and illustrates) a few points about tax-aware long/short
Get caught up on all tax-aware long/short stuff here.
I’ll have a longer note on their work later, but I wanted to focus on their spread diagram. It’s worth studying.
A non-AQR salesperson recently told me that interest expense isn’t that bad “because it’s deductible.”
tl;dr: Financing cost from tax-aware long/short probably isn’t deductible (see infographic below).
Here’s the intuition…
Have a great Tues.
Disclaimer: This is not investment, tax, or legal advice. This is analysis and educational/journalistic and is really just me exploring a comment I heard from a sales guy a few weeks ago. I am not a tax professional. Consult a credentialed adviser for personalized guidance.
Curious why you would assume that overall interest and ordinary dividend income would be a small amount for taxpayers that use this strategy for part of their portfolio? Thanks.