Join our investing community

Proceeds from Share Sales

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

  1. willy1111

    willy1111 Well-Known Member

    Joined:
    5th Jul, 2006
    Posts:
    54
    Location:
    Melbourne
    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    Isn't that going to look like I have withdrawn $40K for private purposes and make that portion of the loan non deductable?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

    Joined:
    22nd Dec, 2006
    Posts:
    351
    Location:
    Adelaide, SA
    I think most margin loans are the same.
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
    Posts:
    1,172
    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.

    Cheers
    N.