There is nothing like equity to assure that outside directors will take more than a passive interest in the decisions they make about a company's future.

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The tracing rule, which has some really complicated regulations, will have you divide your interest expense into trade or business, investment interest, interest associated with passive activities and personal interest.

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As I explained in a book I co-authored some time ago, in an environment like this bankers have grown up as abacus bankers, record keepers of money flows who derive income from seigniorage, from the passive creation of money through interest bearing-loans and government-backed securities rather than from true banking, and from active risk management.

FORBES: Why Do Bankers Make So Many Stupid Mistakes?

Morningstar Principia lists nearly 2, 000 index funds but only a few dozen funds are truly of interest to a purely passive fund investor.

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Also deductible are investment interest, but only to the extent of investment income and trade or business interest (subject to the passive activity loss rules).

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This hits interest, dividends, annuities, royalties, rents, income from a passive trade or business, and realized capital gains other than passive.

FORBES: Facing the Tax Mountain