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Proceeds from Share Sales

Discussion in 'Shares' started by willy1111, 25th Apr, 2007.

  1. willy1111

    willy1111 Well-Known Member

    5th Jul, 2006
    Hi all,

    If I have a margin loan, when I sell shares am I able to direct where the proceeds go? ie can they be paid into a CMT and then I repay the amount in the margin loan which was initially used to purchase that stock.

    Probably easier to explain with an example.

    Lets say I have $50K cash and am going to margin loan another $50K. Total of $100K. I am going to buy 5 stocks $20K in each.

    Stock 1 $20K
    Stock 2 $20K
    Stock 3 $20K
    Stock 4 $20K
    Stock 5 $20K

    Lets say after 12 months the margin loan is now about $55K (as I have been capitalising interest) and the stocks are valued as possible.

    Stock 1 $50K
    Stock 2 $30K
    Stock 3 $25K
    Stock 4 $27K
    Stock 5 $22K

    Lets say I wish to sell out of Stock 1. Proceeds will be $50K. What I would like to do is pay out $10K into margin loan and take the $40K to do with as I please. I figure that I only used $10K from the margin loan to buy this stock so that is all I wish to put back into the margin loan and would like the rest to go into a CMT for personal use.

    How ever if the proceeds go into the margin loan, the balance would be paid down to $5K - and then I redraw the $40K out of the margin loan into my personal account - taking the margin loan upto $45K.

    Isn't that going to look like I have withdrawn $40K for private purposes and make that portion of the loan non deductable?

    I hope that explains what I am trying to do. Any suggestions?
  2. bundy1964

    bundy1964 Well-Known Member

    22nd Dec, 2006
    Adelaide, SA
    I think most margin loans are the same.
  3. Nigel Ward

    Nigel Ward Team InvestEd

    10th Jun, 2005
    Call your broker to ask the question and then give them written (faxed) instructions about how you want it done.

    Provided there's no major deterioration in your LVR as a result I don't see why they should not do so.