## Question about Line 221 - deducting interest expense for dividend investments

Question about Line 221 - Carrying charges and interest expenses

Is interest paid on interest eligible to deduct on that line?

To explain - let's say for simplicity I have a margin investment account that has $1m in stocks, fully invested. I buy $100,000 of an a dividend-paying stock on margin, so I'm eligible to deduct the margin interest on Line 221.

Let's say interest rate is 1%/month,

At the end of month 1 I have $1000 in interest charges, so I end up owing $101,000 to cover the margin.

At the end of month 2 I have $1010 in interest charges ($1000 on borrowed amount, and $10 in interest on $1000 interest in month 1), so I owe $102,010

At the end of the year I have $112682 owed, out of which $12000 is interest on the amount borrowed (100k), and $682 is interest on interest, since I did not make payments monthly.

It's obvious that I can deduct $12000 as on Line 221.

Is $682 -interest on interest- also deductible? Would appreciate any references for confirmation.

Secondly, if dividends are paid out, can they be taken out of the account without affecting eligibility of being able to deduct interest?

Is interest paid on interest eligible to deduct on that line?

To explain - let's say for simplicity I have a margin investment account that has $1m in stocks, fully invested. I buy $100,000 of an a dividend-paying stock on margin, so I'm eligible to deduct the margin interest on Line 221.

Let's say interest rate is 1%/month,

At the end of month 1 I have $1000 in interest charges, so I end up owing $101,000 to cover the margin.

At the end of month 2 I have $1010 in interest charges ($1000 on borrowed amount, and $10 in interest on $1000 interest in month 1), so I owe $102,010

At the end of the year I have $112682 owed, out of which $12000 is interest on the amount borrowed (100k), and $682 is interest on interest, since I did not make payments monthly.

It's obvious that I can deduct $12000 as on Line 221.

Is $682 -interest on interest- also deductible? Would appreciate any references for confirmation.

Secondly, if dividends are paid out, can they be taken out of the account without affecting eligibility of being able to deduct interest?