OMB No. 1545-0191

Form 4952 Investment Interest Expense Deduction

© Attach to your tax return. Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 72

Name(s) shown on return Identifying number

1 Investment interest expense paid or accrued in 1991. See instructions 1

2 Disallowed investment interest expense from 1990 Form 4952, line 23 2

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

4 Net investment income. See instructions 4

Disallowed investment interest expense to be carried forward to 1992. Subtract line 4 from line

3. If zero or less, enter -0- 

5

5

6 Investment interest expense deduction. Enter the smaller of line 3 or line 4. See instructions 6

Form 4952 (1991)Cat. No. 13177Y

General Instructions

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.

The time needed to complete and file

this form will vary depending on

individual circumstances. The estimated

average time is:

Recordkeeping 13 min.

Learning about the

law or the form 14 min.

Preparing the form 11 min.

Copying, assembling, and

sending the form to the IRS 10 min.

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form more

simple, we would be happy to hear from

you. You can write to both the IRS and

the Office of Management and Budget

at the addresses listed in the

instructions for the tax return with which

this form is filed.

Purpose of Form

Interest expense paid by an individual,

estate, or a trust on a loan that is

allocable to property held for investment

(defined on page 2), may not be fully

deductible in the current year. Form

4952 is used to figure the amount of

investment interest expense deductible

for the current year and the amount, if

any, to carry forward to future years.

For more details, get Pub. 550,

Investment Income and Expenses.

Who Must File

If you are an individual, estate, or a

trust, and you claim a deduction for

investment interest expense, you must

complete and attach Form 4952 to your

tax return, unless all of the following

apply:

● Your only investment income was from

interest or dividends,

● You have no other deductible

expenses connected with the production

of interest or dividends,

● Your investment interest expense is

not more than your investment income,

and

● You have no carryovers of investment

interest expense from 1990.

Allocation of Interest

Expense Under Temporary

Regulations Section

1.163-8T

If you paid or accrued interest on a loan

and you used the proceeds of the loan

for more than one purpose, you may

have to allocate the interest paid. This is

necessary because of the different rules

that apply to investment interest,

personal interest, trade or business

interest, home mortgage interest, and

passive activity interest. See Pub. 550.

Specific Instructions

Line 1—Investment Interest

Expense

Enter the investment interest paid or

accrued during the tax year, regardless

of when the indebtedness was incurred.

Include interest paid or accrued on a

loan (or part of a loan) that is allocable

to property held for investment.

Be sure to 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 does not

include the following:

● Home mortgage interest;

● Interest expense that is properly

allocable to a passive activity (see

Passive Activities below);

● Any interest expense that is

capitalized, such as construction interest

subject to section 263A; or

● Interest expense related to tax-exempt

interest income under section 265.

Passive Activities

Line 4—Net Investment

Income

Net investment income is the excess, if

any, of investment income over

investment expenses (see page 2).

Include investment income and

Investment interest expense does not

include any interest expense that is

taken into account in determining your

income or loss from a passive activity.

However, interest expense that is

properly allocable to portfolio income is

investment interest expense and is not

taken into account when determining

your income or loss from a passive

activity. Portfolio income includes

income (not derived in the ordinary

course of a trade or business) from

interest, dividends, annuities, royalties,

and net gain from the disposition of

property held for investment. See the

instructions for Schedule E (Form 1040)

for the definition of passive activity.
Form 4952 (1991) Page 2

expenses 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.

Investment Income

● Rental of substantially nondepreciable

property;

● Equity-financed lending activities; and

● Acquisition of certain interests in a

pass-through entity licensing intangible

property.

See Temporary Regulations section

1.469-2T(f)(10) for details.

In addition to the activities listed

above, net passive income from a

passive activity of a publicly traded

partnership (as defined in section

469(k)(2)) is also included in investment

income. See Notice 88-75, 1988-2 C.B.

386, for details.

Investment income does not include

Alaska Permanent Fund Dividends. See

Rev. Rul. 90-56, 1990-2 C.B. 102.

Property Held for Investment

Property held for investment also

includes an interest in an activity of

conducting a trade or business in which

you did not materially participate and

that is not a passive activity. For

example, a working interest in an oil or

gas property that is not a passive

activity is property held for investment if

you did not materially participate in the

activity.

Investment Expenses

Investment expenses do not include

any deductions taken into account in

determining your income or loss from a

passive activity.

If you have investment expenses that

are included as a miscellaneous itemized

deduction on line 20 of Schedule A

(Form 1040), you may not have to use all

of the amount for purposes of line 4 of

Form 4952. The 2% adjusted gross

income limitation on Schedule A may

reduce the amount.

To figure the amount to use, compare

the amount of the investment expenses

included on line 20 of Schedule A with

the total miscellaneous expenses on line

24 of Schedule A. The smaller of the

investment expenses included on line 20

or the total of line 24 is the amount to

use to figure the investment expense for

line 4.

Example. Assume line 20 of Schedule

A includes investment expenses of

$3,000, and line 24 is $1,300 after the

2% adjusted gross income limitation.

Investment expenses of $1,300 are used

to figure the amount of investment

expense for line 4. If investment

expenses of $800 were included on line

20 and line 24 was $1,300, investment

expenses of $800 would be used.

If you have investment expenses

reported on a form or schedule other

than Schedule A, include those

expenses when figuring investment

expenses for line 4.

Line 6—Investment Interest

Expense Deduction

This is the amount you may deduct as

investment interest expense.

Individuals

Estates and Trusts

Form 6198

Alternative Minimum Tax

Investment income includes income (not

derived in the ordinary course of a trade

or business) from interest, dividends,

annuities, royalties, and net gain from

the disposition of property held for

investment (including capital gain

distributions from mutual funds). Net

income from the following passive

activities is also treated as investment

income:

Property held for investment includes

property that produces investment

income. However, it does not include an

interest in a passive activity. See

Passive Activities, on page 1, for more

details.

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.

Enter the amount from line 6 on line 11

of Schedule A (Form 1040), even if all or

part of it is attributable to a partnership

or an S corporation. However, if any

portion of this amount is attributable to

royalties, enter that portion of the

interest expense on Schedule E (Form

1040).

Enter the amount from line 6 on line 10

of Form 1041.

If any portion of the deductible

investment interest expense is

attributable to an activity for which you

are not at risk, you must also use Form

6198, At-Risk Limitations, to figure your

deductible investment interest expense.

Enter the portion attributable to the

at-risk activity on line 4 of Form 6198.

Reduce line 6 of Form 4952 by the

amount entered on Form 6198. See

Form 6198 and its instructions for more

details, especially the instructions for

line 4 of that form.

Deductible interest expense is an

adjustment for alternative minimum tax

purposes. Get Form 6251, Alternative

Minimum Tax—Individuals, or Form

8656, Alternative Minimum Tax—

Fiduciaries.