Client paid over a half-million to purchase a subchapter S company.
Company responded with a profit of $95,000 for 2007, plus $2400 in portfolio interest income. SCorp passed all of this onto my client.
Client (not the corporation) personally paid $34,000 in interest expense on the half-million dollar loan. After putting this into Form 4952, the software is allowing only the $2400 to be deducted, and the rest of the interest is being carried forward to 2008.
The instructions for form 4952 say that business operations are not included in "investment income." This means that the $95,000 ordinary income cannot be used.
This is ridiculous. Client is paying $34,000 in interest for the purchase of corporate stock that is earning good money. Why can't he deduct it somewhere? Am I doing something wrong, is there something wrong in my approach, or is my client just screwed?
Company responded with a profit of $95,000 for 2007, plus $2400 in portfolio interest income. SCorp passed all of this onto my client.
Client (not the corporation) personally paid $34,000 in interest expense on the half-million dollar loan. After putting this into Form 4952, the software is allowing only the $2400 to be deducted, and the rest of the interest is being carried forward to 2008.
The instructions for form 4952 say that business operations are not included in "investment income." This means that the $95,000 ordinary income cannot be used.
This is ridiculous. Client is paying $34,000 in interest for the purchase of corporate stock that is earning good money. Why can't he deduct it somewhere? Am I doing something wrong, is there something wrong in my approach, or is my client just screwed?
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