Question
Is the interest paid on the whole life insurance policy loan deductible as investment interest if proceeds were used for investment?
I used the proceeds from a whole life insurance policy loan to invest in real estate. The policy was paid up and cashed in and the cash surrender value was reduced by the accrued interest on the loan. 1. Since the proceeds of the loan were used for investment is the interest deductible as investment interest? Is the loan interest added to basis to reduce the taxable portion of the gain on the 1099R? Would the answer change if a separate check was used to pay the interest expense?
