Category - Can't quite understand

[JG EA]

There are many in this category. Perhaps things in this category have been nailed down before, but I didn't quite get it, didn't want to get it, or was too dense to get it. Here's one:

Investment interest on land that was held by taxpayer. At the time the return was done the taxpayer felt it was held for investment, that he would sell it one day.

Now the taxpayer starts building a personal residence on the land. It is no longer investment use.

What happens to the carryover of investment interest on Form 4952. Do you keep carrying it or stop now?

Do you have any reference for this or is it just very obvious?

Thanks,
JG

[BOB W]

Jg

I don't have an official answer, but I believe the deduction stays as a carryover item. The deduction belongs to a previous time period that has carryover attributes and stays with the other carryover tax return issues. Your client is allowed the deduction whenever investment income allows it to be deducted.

Did I over kill this?

[JG EA]

Thanks

Even without the references this makes sense. If there's a carryover on tax returns I didn't do, I would continue, so why not with forms I when I know the history.
Thank you,

JG

[BOB W]

Now, if you................

............ are questioning the correctness of the original deduction since the t/p has changed the character of the land, don't. It was the intent "at the time" that should be looked at.

The question now is, when does it become a home or second home in order to deduct the land loan interest? We know that construction loan interest should be capitalized when building a home but what about the land loan that is NOT investment interest expense going forward?

Can we say that the new (non-residence) home is nothing more than a continuation of the t/p investment?