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:
Interest 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.
a. Helen's net investment income is $fill in the blank 22871709d02bf8c_1. Helen's investment interest expense deduction in the current year is $fill in the blank 22871709d02bf8c_2.
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.
| The investment interest disallowed is carried over and becomes investment interest expense in the subsequent year. | TrueFalse | | The investment interest disallowed is lost and not subject to any carryover. | TrueFalse | | The investment interest disallowed is carried over and may be used to offset any type of income in the subsequent year. | TrueFalse | |
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 Investment Interest Expense Deduction 2020 Department of the Treasury Internal Revenue Service (99) 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 2020 (see instructions) 1 2 Disallowed investment interest expense from 2019 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 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 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 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-O- 6 Part III Investment Interest Expense Deduction 7 Disallowed investment interest expense to be carried forward to 2021. 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 (2020)