Using the proceeds from a home equity loan to then loan the funds to your business may make financial sense but won’t give you interest deductions (beyond the limit on up to $100,000 of home equity debt). The Tax Court says that the funds used as a business loan are not an equity investment that would permit all of the interest to be deductible. Had the home equity loan funds been to buy an ownership interest, all of the interest would have been deductible.
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