Fill - Free fillable Investment Interest Expense Deduction 4952 PDF form

Form 4952

Department of the Treasury

Internal Revenue Service (99)

Investment Interest Expense Deduction

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Go to www.irs.gov/Form4952 for the latest information.

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Attach to your tax return.

OMB No. 1545-0191

2018

Attachment

Sequence No.

Name(s) shown on return

Identifying number

Part I

Total Investment Interest Expense

1 Investment interest expense paid or accrued in 2018 (see instructions) . . . . . . . . 1

2 Disallowed investment interest expense from 2017 Form 4952, line 7 . . . . . . . . . 2

3 Total investment interest expense. Add lines 1 and 2 . . . . . . . . . . . . . .

Part II

Net Investment Income

Gross income from property held for investment (excluding any net

gain from the disposition of property held for investment) . . .

b Qualified dividends included on line 4a . . . . . . . . . 4b

c Subtract line 4b from line 4a . . . . . . . . . . . . . . . . . . . . . . 4c

d Net gain from the disposition of property held for investment . . 4d

Enter the smaller of line 4d or your net capital gain from the

disposition of property held for investment (see instructions) . .

f Subtract line 4e from line 4d . . . . . . . . . . . . . . . . . . . . . . 4f

Enter the amount from lines 4b and 4e that you elect to include in investment income (see

instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

h Investment income. Add lines 4c, 4f, and 4g . . . . . . . . . . . . . . . . . 4h

5 Investment expenses (see instructions) . . . . . . . . . . . . . . . . . . . 5

Net investment income. Subtract line 5 from line 4h. If zero or less, enter -0- . . . . . .

Part III

Investment Interest Expense Deduction

Disallowed investment interest expense to be carried forward to 2019. Subtract line 6 from

line 3. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . .

8 Investment interest expense deduction. Enter the smaller of line 3 or 6. See instructions . .

For Paperwork Reduction Act Notice, see page 4.

Cat. No. 13177Y

Form 4952 (2018)

THIS PAGE INTENTIONALLY LEFT BLANK

Form 4952 (2018)

Page 3

Section references are to the Internal Revenue Code unless otherwise

noted.

Future Developments

For the latest information about developments related to Form 4952 and

its instructions, such as legislation enacted after they were published,

go to www.irs.gov/Form4952.

General Instructions

Purpose of Form

Use Form 4952 to figure the amount of investment interest expense you

can deduct for 2018 and the amount you can carry forward to future

years. Your investment interest expense deduction is limited to your net

investment income.

For more information, see Pub. 550, Investment Income and

Expenses.

Who Must File

If you are an individual, estate, or a trust, you must file Form 4952 to

claim a deduction for your investment interest expense.

Exception. You don't have to file Form 4952 if all of the following apply.

• Your investment income from interest and ordinary dividends minus

any qualified dividends is more than your investment interest expense.

• You don't have any other deductible investment expenses.

• You don't have any carryover of disallowed investment interest

expense from 2017.

Allocation of Interest Expense

If you paid or accrued interest on a loan and used the loan proceeds for

more than one purpose, you may have to allocate the interest. This is

necessary because different rules apply to investment interest, personal

interest, trade or business interest, home mortgage interest, and passive

activity interest. See Pub. 535, Business Expenses.

Specific Instructions

Part I—Total Investment Interest Expense

Line 1

Enter the investment interest expense paid or accrued during the tax

year, regardless of when you incurred the indebtedness. Investment

interest expense is interest paid or accrued on a loan or part of a loan

that is allocable to property held for investment (as defined later).

Include investment interest expense reported to you on Schedule K-1

from a partnership or an S corporation. Include amortization of bond

premium on taxable bonds purchased after October 22, 1986, but

before January 1, 1988, unless you elected to offset amortizable bond

premium against the interest payments on the bond. A taxable bond is a

bond on which the interest is includible in gross income.

Investment interest expense doesn't include any of the following.

• Personal interest under section 163(h), including qualified residence

interest.

• Interest expense that is properly allocable to a passive activity.

Generally, a passive activity is any trade or business activity in which

you don't materially participate and any rental activity. See the

Instructions for Form 8582, Passive Activity Loss Limitations, for details.

• Any interest expense that is capitalized, such as construction interest

subject to section 263A.

• Interest expense related to tax-exempt interest income under

section 265.

• Interest expense, disallowed under section 264, on indebtedness with

respect to life insurance, endowment, or annuity contracts issued after

June 8, 1997, even if the proceeds were used to purchase any property

held for investment.

Property held for investment. Property held for investment includes

property that produces income, not derived in the ordinary course of a

trade or business, from interest, dividends, annuities, or royalties. It also

includes property that produces gain or loss, not derived in the ordinary

course of a trade or business, from the disposition of property that

produces these types of income or is held for investment. However, it

doesn't include an interest in a passive activity.

Exception. A working interest in an oil or gas property that you held

directly or through an entity that didn't limit your liability is property held

for investment, but only if you didn't materially participate in the activity.

Part II—Net Investment Income

Line 4a

Gross income from property held for investment includes income,

unless derived in the ordinary course of a trade or business, from

interest, ordinary dividends (except Alaska Permanent Fund dividends),

annuities, and royalties. Include investment income reported to you on

Schedule K-1 from a partnership or an S corporation. Also include net

investment income from an estate or a trust.

Also include on line 4a (or 4d, if applicable) net passive income from a

passive activity of a publicly traded partnership (as defined in section

469(k)(2)). See Regulations sections 1.469-10 and 1.7704-1 (including

the transition rule of section 1.7704-1(l)), for details.

Net income from certain passive activities, such as rental of

substantially nondepreciable property, may have to be recharacterized

and included on line 4a. For details, see Pub. 925, Passive Activity and

At-Risk Rules, or Regulations section 1.469-2(f)(10).

If you are filing Form 8814, Parents' Election To Report Child's

Interest and Dividends, part or all of your child's income may be

included on line 4a. See the instructions for Form 8814 for details.

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CAUTION

Don't include on line 4a any net gain from the disposition of

property held for investment. Instead, enter it on line 4d.

Line 4b

Enter the portion of ordinary dividends included on line 4a that are

qualified dividends. For the definition of qualified dividends, see the

instructions for Form 1040, line 3a (or Form 1041, line 2b).

Line 4d

Net gain from the disposition of property held for investment is the

excess, if any, of your total gains over your total losses from the

disposition of property held for investment. When figuring this amount,

include capital gain distributions from mutual funds and capital loss

carryovers.

Line 4e

Net capital gain from the disposition of property held for investment is

the excess, if any, of your net long-term capital gain over your net short-

term capital loss from the disposition of property held for investment.

Capital gain distributions from mutual funds are treated as long-term

capital gains.

Note: If line 4e is more than zero and you enter an amount on line 4g,

see the Note in the line 4g instructions.

Line 4g

In general, qualified dividends and net capital gain from the disposition

of property held for investment are excluded from investment income.

But you can elect to include part or all of these amounts in investment

income.

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CAUTION

The qualified dividends and net capital gain that you elect to

include in investment income on line 4g aren't eligible to be

taxed at the qualified dividends or capital gains tax rates. You

should consider the tax effect of using the qualified dividends

and capital gains tax rates before making this election. Once made, the

election can be revoked only with IRS consent.

To make the election, enter on line 4g the amount you elect to include

in investment income (don't enter more than the sum of lines 4b and 4e).

Also enter this amount on whichever of the following applies.

• The Qualified Dividends and Capital Gain Tax Worksheet, line 5, in the

Instructions for Form 1040.

• The Schedule D Tax Worksheet, line 3.

• Schedule D (Form 1041), line 25.

• The Qualified Dividends Tax Worksheet, line 3, in the Instructions for

Form 1041.

Form 4952 (2018)

Page 4

Don't reduce the amount of qualified dividends on Form 1040, line 3a

(or Form 1041, line 2b(2)), by any part of the amount on line 4g.

Note: The amount on line 4g is generally treated as being attributable

first to net capital gain from property held for investment (line 4e), and

then to qualified dividends (line 4b). This treatment results in the least

tax being figured for Form 1040, line 11 (or Form 1041, Schedule G, line

1a). However, you can treat less of the amount on line 4e as attributable

to line 4g and more to line 4b. You may want to do this if you are filing

Form 1116, Foreign Tax Credit, as your tax after credits may be lower in

certain cases. To do so, enter on the dotted line next to line 4e “Elec.”

and the part of line 4e that you elect to treat as being attributable to line

4g (don't enter less than the excess of line 4g over line 4b). You will use

this smaller amount instead of the amount on line 4e when figuring your

tax.

Generally, you must make this election on a timely filed return,

including extensions. However, if you timely filed your return without

making the election, you can make the election on an amended return

filed within 6 months of the due date of your return (excluding

extensions). Write “Filed pursuant to section 301.9100-2” on the

amended return and file it at the same place you filed the original return.

Line 5

Investment expenses are your allowed deductions, other than interest

expense, directly connected with the production of investment income.

For example, depreciation or depletion allowed on assets that produce

investment income is an investment expense.

Include investment expenses reported to you on Schedule K-1 from a

partnership or an S corporation.

Investment expenses don't include any deductions used in

determining your income or loss from a passive activity.

Part III—Investment Interest Expense Deduction

Line 8

Individuals. Generally, enter the amount from line 8 (excluding any

amount included on Form 6198, line 4—see later) on Schedule A (Form

1040), line 9, even if all or part of it is attributable to a partnership or an

S corporation. However, if any part of the interest expense is attributable

to royalties, enter that part on Schedule E (Form 1040). Also, if any part

of the interest is attributable to a trade or business that isn't a passive

activity, enter that part on the schedule where you report other

expenses for that trade or business.

Estates and trusts. Enter the amount from line 8 (excluding any amount

included on Form 6198, line 4—see below) on Form 1041, line 10.

However, if any part of the interest is attributable to a trade or business

that isn't a passive activity, enter that part on the schedule where you

report other expenses for that trade or business.

Form 6198. If any of your deductible investment interest expense is

attributable to an activity for which you aren't at risk, you must also use

Form 6198, At-Risk Limitations, to figure your deductible investment

interest expense. Include the part attributable to the at-risk activity on

Form 6198, line 4.

Alternative minimum tax (AMT). Deductible interest expense may be

an adjustment for the AMT. For details, see Form 6251, Alternative

Minimum Tax—Individuals, or Schedule I (Form 1041).

Paperwork Reduction Act Notice. We ask for the information on this

form to carry out the Internal Revenue laws of the United States. You

are required to give us the information. We need it to ensure that you are

complying with these laws and to allow us to figure and collect the right

amount of tax.

You aren't required to provide the information requested on a form

that is subject to the Paperwork Reduction Act unless the form displays

a valid OMB control number. Books or records relating to a form or its

instructions must be retained as long as their contents may become

material in the administration of any Internal Revenue law. Generally, tax

returns and return information are confidential, as required by section

6103.

The time needed to complete and file this form will vary depending on

individual circumstances. The estimated burden for individual taxpayers

filing this form is approved under OMB control number 1545-0074 and

is included in the estimates shown in the instructions for their individual

income tax return. The estimated burden for all other taxpayers who file

this form is: Recordkeeping, 39 min.; Learning about the law or the

form, 12 min.; Preparing the form, 24 min.; and Copying,

assembling, and sending the form to the IRS, 13 min.

If you have comments concerning the accuracy of these time

estimates or suggestions for making this form simpler, we would be

happy to hear from you. See the instructions for the tax return with

which this form is filed.

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