Helen Derby borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During the current year, she reported AGI of $90,000 and paid interest of $12,000 on the loan. Other items related to Helen's investments include the following: Investment and annuity income $11,000 Long-term capital gain on sale of stock 3,500 Real estate tax on the investment land 800 Helen is unmarried, does not itemize her deductions and does not elect to treat the capital gain as investment income. Helen did not have a disallowed investment interest expense amount from the prior year. Helen's net investment income is $ 10,200 . Helen's investment interest expense deduction in the current year is $ 1,800 X. Feedback Check My Work Taxpayers frequently borrow funds they use to acquire investment assets. When the interest expense is large relative to the income from the investments, substantial tax benefits may result. Congress has therefore limited the deductibility of interest on funds borrowed for the purpose of purchasing or continuing to hold investment property. b. Indicate whether the following statements are "True" or "False" regarding the treatment of the portion of Helen's investment interest that is disallowed in the current year. True The investment interest disallowed is carried over and becomes investment interest expense in the subsequent year. The investment interest disallowed is lost and not subject to any carryover. False X c. Complete Helen's Form 4952 for the current year. For this purpose, assume that she chooses not to include the long-term capital gain as investment income. Enter all amounts as positive numbers. If an amount is zero, enter "O". OMB No. 1545-0191 Form 4952 2019 Department of the Treasury Internal Revenue Service (99) Investment Interest Expense Deduction Go to www.irs.gov/form4952 for the latest information. Attach to your tax return. Attachment Sequence No. 51 Name(s) shown on return Helen Derby Identifying number 123-45-6789 Part I Total Investment Interest Expense 1 Investment interest expense paid or accrued in 2019 (see instructions) 1 2 Disallowed investment interest expense from 2018 Form 4952, line 7 2 3 Total investment interest expense. Add lines 1 and 2... 3 Part II Net Investment Income 4a 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 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 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 -O- Part III Investment Interest Expense Deduction 7 Disallowed investment interest expense to be carried forward to 2020. Subtract line 6 from line 3. If zero or less, enter -o-, 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 (2019) Helen Derby borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During the current year, she reported AGI of $90,000 and paid interest of $12,000 on the loan. Other items related to Helen's investments include the following: Investment and annuity income $11,000 Long-term capital gain on sale of stock 3,500 Real estate tax on the investment land 800 Helen is unmarried, does not itemize her deductions and does not elect to treat the capital gain as investment income. Helen did not have a disallowed investment interest expense amount from the prior year. Helen's net investment income is $ 10,200 . Helen's investment interest expense deduction in the current year is $ 1,800 X. Feedback Check My Work Taxpayers frequently borrow funds they use to acquire investment assets. When the interest expense is large relative to the income from the investments, substantial tax benefits may result. Congress has therefore limited the deductibility of interest on funds borrowed for the purpose of purchasing or continuing to hold investment property. b. Indicate whether the following statements are "True" or "False" regarding the treatment of the portion of Helen's investment interest that is disallowed in the current year. True The investment interest disallowed is carried over and becomes investment interest expense in the subsequent year. The investment interest disallowed is lost and not subject to any carryover. False X c. Complete Helen's Form 4952 for the current year. For this purpose, assume that she chooses not to include the long-term capital gain as investment income. Enter all amounts as positive numbers. If an amount is zero, enter "O". OMB No. 1545-0191 Form 4952 2019 Department of the Treasury Internal Revenue Service (99) Investment Interest Expense Deduction Go to www.irs.gov/form4952 for the latest information. Attach to your tax return. Attachment Sequence No. 51 Name(s) shown on return Helen Derby Identifying number 123-45-6789 Part I Total Investment Interest Expense 1 Investment interest expense paid or accrued in 2019 (see instructions) 1 2 Disallowed investment interest expense from 2018 Form 4952, line 7 2 3 Total investment interest expense. Add lines 1 and 2... 3 Part II Net Investment Income 4a 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 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 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 -O- Part III Investment Interest Expense Deduction 7 Disallowed investment interest expense to be carried forward to 2020. Subtract line 6 from line 3. If zero or less, enter -o-, 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 (2019)