Need help with Form 4952

Discussion in 'Professional Trading' started by scntaxpro, Feb 10, 2007.

  1. This is the first year I have ever had to fill out form 4952 for Investment Interest Expense Deduction. Can someone explain to me the difference between line 4d and 4e?

    for the year i had a $12,000 short term capital loss and $0 long term capital gain. Would the 12,000 loss go on line 4d and $0 long term gain go on line 4e?

    Any help would be appreciated.
  2. No, both lines 4d and 4e would be zero. Therefore, the $3,000 net capital loss would NOT reduce your net investment income for purposes of Form 4972.

    Rarely, if ever will lines 4d and 4e be different. I have unsuccessfully attempted to find a situation where they are different.

  3. so 4d and 4e are only for net capital gains? losses are never included?
  4. nkhoi

    nkhoi Moderator

    1) are you trader, mark-to-market or just regular Joe who lost money?

    2) is it related to trading stocks, futures or commodities?
  5. i'm just average joe investor who lost money.

    i traded stocks and stock options.
  6. investment interest expense would be something like interest you paid to buy stocks on margin. you losses would be realized through the schedule d if you are talking stocks or options.

  7. but I am not allowed to take investment interest expense in excess of investment income. I have some interest income, but my short term capital loss far exceeds my interest income. So would my short term capital loss keep me from being able to claim investment interest on schedule A?
  8. Scntaxpro, capital investment losses would be considered only to the extent of capital investment gains. The various lines in #4 are only for the purpose of computing your "net investment income", because investment interest expense is only deductible to the extent of net investment income.

    One way that many taxpayers get screwed is if they have investment interest expense but use the standard deduction instead of itemizing deductions on Schedule A.

  9. nkhoi

    nkhoi Moderator

  10. Nkhoi, with all of my clilents who have any investment interest expense, I always attach a Form 4952, whether required or not. The reason is that the investment interest expense which is disallowed due to the limitation, is a carryforward to the next taxable year. The Form 4952 helps to keep track of this.

    #10     Feb 11, 2007