Say I get paid a dividend (perhaps from my ROC that’s due mid-month) and its paid into my E*Trade account. That account has a negative balance (since I’ve been trading on margin). That interest paid on that negative balance is tax-deductible.
How is that affected if I withdraw the dividend payment and use it for something else? Say I withdrew it and applied it to a principle residence mortgage (non-deductible debt). From Revenue Canada’s perspective, would I have paid back part of my margin loan, then re-borrowed the money for non-deductible purchases (and thereby “contaminated” the margin loan), or would their view be that as long as I withdrew EXACTLY what was deposited, then I didn’t really repay any of the loan (it just traveled briefly through my account)?
If the mingling is bad, can/should I get E*Trade to make dividend payments directly to me?
Thanks if anyone knows! A pointer to a sites dealing with this issue would be greatly appreciated!