Hi all I’d appreciate if someone with experience could comment on the scenario and questions below. Sorry it’s long but hopefully it makes reasonable sense. I don't think this has been covered in other threads. Scenario: We have a 62k LOC secured against PPOR. Funds used to invest in four MFs. Additional $2k of cash invested in MFs each month for past 5 months. Recently purchased IP off the plan. Construction not due to be completed until mid to late 2012. In the interim need to come up with $12k for stamp duty and $17k for the required deposit. Plan is to sell down some MF units to fund these two expenses. Questions: I presume if we sell down $29k worth of MFs and then use the proceeds for stamp duty and the deposit, the interest on the LOC will still be deductible because the purpose of the loan is still for income producing assets (though now split between two different asset classes). Am I correct? When it comes to tax time this year we will have a small capital gain to report on the MF units sold. Question is: how do we calculate the cost base on the MF units we sold? The units have been purchased at five different points in time, and were therefore purchased at five different unit prices. Can we simply arbitrarily choose which units we have sold and use the unit price on those units to calculate the cost base? And then we sell the rest of the units at some point in the future, use the unit price of the remaining units to calculate the cost base for that CGT event? Or is there some other accepted way of determining the cost base when only a portion of MF units are sold (like working out an average unit cost)? An associated question is after we sell a portion of the MF units, how do I calculate what portion of the LOC has been used for MFs and how much used for the IP expenses (I suspect the answer is very much related to the question above). I figure it is important to try and track this so when I sell down the MFs completely, I know what percentage of the LOC interest is still deductible (i.e. the % that has been used for IP expenses). One final issue is that we are considering using a deposit bond for the 5% deposit instead of selling down MF units. I’ve got some internet quotes and it seems to get a 33 month deposit bond for $17k will cost around $2.5k. Seems expensive at first glance but I guess it would allow us to keep $17k in MFs. If the MFs increase by more than 15% over the next 3 years then we will be in front – if not then we would have been better off selling the MFs. Does that make sense or am I missing something? Are the fees associated with deposit bonds for IPs tax deductible? Thanks in advance for any wisdom on the above questions .