Form 4952 

Department of the Treasury 

Internal Revenue Service (99) 

Investment Interest Expense Deduction 

▶ Information about Form 4952 and its instructions is at www.irs.gov/form4952.

▶ Attach to your tax return.

OMB No. 1545-0191 

2013

Attachment 

Sequence No. 51 

Name(s) shown on return Identifying number 

Part I Total Investment Interest Expense 

1 Investment interest expense paid or accrued in 2013 (see instructions) . . . . . . . . 1 

2 Disallowed investment interest expense from 2012 Form 4952, line 7 . . . . . . . . . 2 

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

Part II Net Investment Income 

4 a Gross income from property held for investment (excluding any net 

gain from the disposition of property held for investment) . . . 4a 

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 

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

disposition of property held for investment (see instructions) . 4e 

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

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

instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4g

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

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

6 Net investment income. Subtract line 5 from line 4h. If zero or less, enter -0- . . . . . . 6 

Part III Investment Interest Expense Deduction 

7 Disallowed investment interest expense to be carried forward to 2014. Subtract line 6 from 

line 3. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . 7 

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

For Paperwork Reduction Act Notice, see page 4. Cat. No. 13177Y Form 4952 (2013) 
THIS PAGE INTENTIONALLY LEFT BLANK
Form 4952 (2013) 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 2013 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 do not 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 do not have any other deductible investment expenses. 

• You do not have any carryover of disallowed investment interest 

expense from 2012. 

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 does not include any of the following: 

• Home mortgage interest. 

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

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

you do not 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 

does not 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 did not limit your liability is property 

held for investment, but only if you did not 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 Notice 88-75, 1988-2 C.B. 386, 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. 

▲!

CAUTION

Do not 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 9b (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 shortterm 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. 

▲!

CAUTION

The qualified dividends and net capital gain that you elect to 

include in investment income on line 4g are not 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 (do not 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 (2013) Page 4 

Do not reduce the amount of qualified dividends on Form 1040, line 

9b (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 44 (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 (do not 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 do not include any deductions used in 

determining your income or loss from a passive activity. 

If you have investment expenses that are included as a miscellaneous 

itemized deduction on Schedule A (Form 1040), line 23, the 2% adjusted 

gross income limitation on Schedule A (Form 1040), line 26, may reduce 

the amount you must include on Form 4952, line 5. Include on line 5 the 

smaller of: (a) the investment expenses included on Schedule A (Form 

1040), line 23, or (b) the total on Schedule A (Form 1040), line 27. 

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—later) on Schedule A (Form 

1040), line 14, 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 is not 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 is not 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 are not 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 are not 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.