Form 4952-Investment Income & Expenses

[zeros]

Anybody have any experience on using this form? It looks like it is used to allow investment expenses to the extent of investment income and carry any excess forward. What type of income can be used for this? Any help will be appreciated.

[ChEAr$]

Anybody have any experience on using this form? It looks like it is used to allow investment expenses to the extent of investment income and carry any excess forward. What type of income can be used for this? Any help will be appreciated.

Only investment type income. See instructions for the form for details.

[BP.]

Anybody have any experience on using this form? It looks like it is used to allow investment expenses to the extent of investment income and carry any excess forward. What type of income can be used for this? Any help will be appreciated.

This is a useful form for reducing overall tax liability. Most commonly, I've used it to elect that qualified dividends not be treated as qualified so it can offset investment expense- like margin interest or interest paid on a loan secured by unimproved land, making this interest deductible on Schedule A. It's tricky if I don't get those darn checkboxes in order, though.

[ChEAr$]

This is a useful form for reducing overall tax liability. Most commonly, I've used it to elect that qualified dividends not be treated as qualified so it can offset investment expense- like margin interest or interest paid on a loan secured by unimproved land, making this interest deductible on Schedule A. It's tricky if I don't get those darn checkboxes in order, though.

Hmmm. let's see now. If qualified dividends are not taxable, and you have investment
interest which goes on the 4952,....... why wash them out here? why not take
advantage of qualified dividends treatment while we have it, and simply carryover the
interest expense to next year and following?

To make this election would also increase AGI, and thus increase the 7 1/2 % and the 2%.....

[BP.]

Hmmm. let's see now. If qualified dividends are not taxable, and you have investment
interest which goes on the 4952,....... why wash them out here? why not take
advantage of qualified dividends treatment while we have it, and simply carryover the
interest expense to next year and following?

To make this election would also increase AGI, and thus increase the 7 1/2 % and the 2%.....

I'm gonna try a quick & dirty reply w/o a chance to look at the folks whose returns this pertains to.

First off- the QD's in my cases ARE taxable- at 15%.

And yes, I get that the floors are increased but if no med & no misc expenses that's not a factor.

And why not carryover? (Though in reality, there are carryovers remaining as we can't always utilize the full interest expense deduction.) Well, client can make that decision, but generally people are opting to save taxes today and worry about tomorrow when it gets here.

OK now something resembling math- Let's assume:
Client in 25% bracket. (Not a good stategy for the lower brackets, obviously.)
QD's taxed at 15%. No interest expense deduction. Hence tax on the divs.
Elect non-QD's- taxed at 25%, but all offset by interest expense deduction. Effectively no tax on the divs. I work it each way, get the tax savings by electing on the 4952, present to client. Savings can be quite significant based on actual numbers involved.

[ChEAr$]

I'm gonna try a quick & dirty reply w/o a chance to look at the folks whose returns this pertains to.

First off- the QD's in my cases ARE taxable- at 15%.

And yes, I get that the floors are increased but if no med & no misc expenses that's not a factor.

And why not carryover? (Though in reality, there are carryovers remaining as we can't always utilize the full interest expense deduction.) Well, client can make that decision, but generally people are opting to save taxes today and worry about tomorrow when it gets here.

OK now something resembling math- Let's assume:
Client in 25% bracket. (Not a good stategy for the lower brackets, obviously.)
QD's taxed at 15%. No interest expense deduction. Hence tax on the divs.
Elect non-QD's- taxed at 25%, but all offset by interest expense deduction. Effectively no tax on the divs. I work it each way, get the tax savings by electing on the 4952, present to client. Savings can be quite significant based on actual numbers involved.

And THAT is an example of good tax work, what our clients pay us for.