4952 Investment Interest Expense Deduction

OMB No. 1545-0191

2023
Form
Attach to your tax return.
Department of the Treasury Attachment
Go to www.irs.gov/Form4952 for the latest information.
Internal Revenue Service Sequence No. 51
Name(s) shown on return Identifying number

Part I Total Investment Interest Expense

1 Investment interest expense paid or accrued in 2023 (see instructions) . . . . . . . . . . 1
2 Disallowed investment interest expense from 2022 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
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 2024. 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 line 6. See instructions . . 8
For Paperwork Reduction Act Notice, see page 4. Cat. No. 13177Y Form 4952 (2023)
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Form 4952 (2023) Page 3

Section references are to the Internal Revenue Code unless otherwise Exception. A working interest in an oil or gas property that you held
noted. directly or through an entity that didn’t limit your liability is property held
for investment, but only if you didn’t materially participate in the activity.
Future Developments
For the latest information about developments related to Form 4952 and Part II—Net Investment Income
its instructions, such as legislation enacted after they were published, Line 4a
go to www.irs.gov/Form4952.
Gross income from property held for investment includes income,
unless derived in the ordinary course of a trade or business, from
General Instructions interest, ordinary dividends (except Alaska Permanent Fund dividends),
Purpose of Form annuities, and royalties. Include investment income reported to you on
Use Form 4952 to figure the amount of investment interest expense you Schedule K-1 from a partnership or an S corporation. Also include net
can deduct for 2023 and the amount you can carry forward to future investment income from an estate or a trust.
years. Your investment interest expense deduction is limited to your net Also include on line 4a (or 4d, if applicable) net passive income from a
investment income. passive activity of a publicly traded partnership (as defined in section
For more information, see Pub. 550, Investment Income and 469(k)(2)). See Regulations sections 1.469-10 and 1.7704-1 (including
Expenses. the transition rule of section 1.7704-1(l)) for details.
Net income from certain passive activities, such as rental of
Who Must File substantially nondepreciable property, may have to be recharacterized
If you are an individual, estate, or a trust, you must file Form 4952 to and included on line 4a. For details, see Pub. 925, Passive Activity and
claim a deduction for your investment interest expense. At-Risk Rules, or Regulations section 1.469-2(f)(10).
Exception. You don’t have to file Form 4952 if all of the following apply. If you are filing Form 8814, Parents’ Election To Report Child’s
• Your investment income from interest and ordinary dividends minus Interest and Dividends, part or all of your child’s income may be
any qualified dividends is more than your investment interest expense. included on line 4a. See the instructions for Form 8814 and Pub. 550 for
• You don’t have any other deductible investment expenses. details.

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• You don’t have any carryover of disallowed investment interest Don’t include on line 4a any net gain from the disposition of
expense from 2022.
Allocation of Interest Expense
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CAUTION
property held for investment. Instead, enter it on line 4d.

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 Line 4b
necessary because different rules apply to investment interest, personal Enter the portion of ordinary dividends included on line 4a that are
interest, trade or business interest, home mortgage interest, and passive qualified dividends. For the definition of qualified dividends, see the
activity interest. See Temporary Regulations section 1.163-8T, instructions for Form 1040, line 3a (or Form 1041, line 2b).
Regulations section 1.163-15, and Notice 89-35, 1989-1 C.B. 675. Line 4d
Net gain from the disposition of property held for investment is the
Specific Instructions excess, if any, of your total gains over your total losses from the
Part I—Total Investment Interest Expense disposition of property held for investment. When figuring this amount,
include capital gain distributions from mutual funds and capital loss
Line 1 carryovers.
Enter the investment interest expense paid or accrued during the tax
year, regardless of when you incurred the indebtedness. Investment Line 4e
interest expense is interest paid or accrued on a loan or part of a loan Net capital gain from the disposition of property held for investment is
that is allocable to property held for investment (as defined later). the excess, if any, of your net long-term capital gain over your net short-
Include investment interest expense reported to you on Schedule K-1 term capital loss from the disposition of property held for investment.
from a partnership or an S corporation. Include amortization of bond Capital gain distributions from mutual funds are treated as long-term
premium on taxable bonds purchased after October 22, 1986, but capital gains.
before January 1, 1988, unless you elected to offset amortizable bond Note: If line 4e is more than zero and you enter an amount on line 4g,
premium against the interest payments on the bond. A taxable bond is a see the Note in the line 4g instructions, later.
bond on which the interest is includible in gross income. Line 4g
Investment interest expense doesn’t include any of the following. In general, qualified dividends and net capital gain from the disposition
• Personal interest under section 163(h), including qualified residence of property held for investment are excluded from investment income.
interest. But you can elect to include part or all of these amounts in investment
• Interest expense that is properly allocable to a passive activity. income.
Generally, a passive activity is any trade or business activity in which The qualified dividends and net capital gain that you elect to
you don’t 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
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! include in investment income on line 4g aren’t eligible to be
taxed at the qualified dividends or capital gains tax rates.
CAUTION You should consider the tax effect of using the qualified
subject to section 263A. dividends and capital gains tax rates before making this
• Interest expense related to tax-exempt interest income under election. Once made, the election can be revoked only with IRS consent.
section 265. To make the election, enter on line 4g the amount you elect to include
• Interest expense, disallowed under section 264, on indebtedness with in investment income (don’t enter more than the sum of lines 4b and 4e).
respect to life insurance, endowment, or annuity contracts issued after Also enter this amount on whichever of the following applies.
June 8, 1997, even if the proceeds were used to purchase any property • The Schedule D Tax Worksheet, line 3.
held for investment. • Schedule D (Form 1041), line 25.
Property held for investment. Property held for investment includes • The Qualified Dividends Tax Worksheet, line 3, in the Instructions for
property that produces income, not derived in the ordinary course of a Form 1041.
trade or business, from interest, dividends, annuities, or royalties. It also
If you file Form 1040 or 1040-SR and enter an amount on
includes property that produces gain or loss, not derived in the ordinary
course of a trade or business, from the disposition of property that TIP line 4g, use the Schedule D Tax Worksheet in the
Instructions for Schedule D (Form 1040) to figure the amount
produces these types of income or is held for investment. However, it
to enter on Form 1040 or 1040-SR, line 16. If you file Form
doesn’t include an interest in a passive activity.
1041 and enter amounts on lines 4e and 4g, use the Schedule D Tax
Worksheet in the Instructions for Schedule D (Form 1041) to figure the
amount to enter on Form 1041, Schedule G, line 1a.
Form 4952 (2023) Page 4

Don’t reduce the amount of qualified dividends on Form 1040 or to royalties, enter that part on Schedule E (Form 1040). Also, if any part
1040-SR, line 3a (or Form 1041, line 2b(2)), by any part of the amount on of the interest is attributable to a trade or business that isn’t a passive
line 4g. activity, enter that part on the schedule where you report other
expenses for that trade or business.
Note: The amount on line 4g is generally treated as being attributable Estates and trusts. Enter the amount from line 8 (excluding any amount
first to net capital gain from property held for investment (line 4e), and included on Form 6198, line 4—see below) on Form 1041, line 10.
then to qualified dividends (line 4b). This treatment results in the least However, if any part of the interest is attributable to a trade or business
tax being figured for Form 1040 or 1040-SR, line 16 (or Form 1041, that isn’t a passive activity, enter that part on the schedule where you
Schedule G, line 1a). However, you can treat less of the amount on line report other expenses for that trade or business.
4e as attributable to line 4g and more to line 4b. You may want to do
Form 6198. If any of your deductible investment interest expense is
this if you are filing Form 1116, Foreign Tax Credit, as your tax after
attributable to an activity for which you aren’t at risk, you must also use
credits may be lower in certain cases. To do so, enter on the dotted line
Form 6198, At-Risk Limitations, to figure your deductible investment
next to line 4e “Elec.” and the part of line 4e that you elect to treat as
interest expense. Include the part attributable to the at-risk activity on
being attributable to line 4g (don’t enter less than the excess of line 4g
Form 6198, line 4.
over line 4b). You will use this smaller amount instead of the amount on
line 4e when figuring your tax. Alternative minimum tax (AMT). Deductible interest expense may be
an adjustment for the AMT. For details, see Form 6251, Alternative
Generally, you must make this election on a timely filed return, Minimum Tax—Individuals, or Schedule I (Form 1041).
including extensions. However, if you timely filed your return without
making the election, you can make the election on an amended return Paperwork Reduction Act Notice. We ask for the information on this
filed within 6 months of the due date of your return (excluding form to carry out the Internal Revenue laws of the United States. You
extensions). Write “Filed pursuant to section 301.9100-2” on the are required to give us the information. We need it to ensure that you are
amended return and file it at the same place you filed the original return. complying with these laws and to allow us to figure and collect the right
amount of tax.
Line 5
You aren’t required to provide the information requested on a form
Investment expenses are your allowed deductions, other than interest
that is subject to the Paperwork Reduction Act unless the form displays
expense, directly connected with the production of investment income.
a valid OMB control number. Books or records relating to a form or its
For example, depreciation or depletion allowed on assets that produce
instructions must be retained as long as their contents may become
investment income is an investment expense.
material in the administration of any Internal Revenue law. Generally, tax
Include investment expenses incurred directly by you or reported to returns and return information are confidential, as required by section
you on Schedule K-1 from a partnership, or by an S corporation, but 6103.
only if you are allowed a deduction on your return for the expense.
The time needed to complete and file this form will vary depending on
Investment expenses don’t include any deductions used in individual circumstances. The estimated burden for individual taxpayers
determining your income or loss from a passive activity. filing this form is approved under OMB control number 1545-0074 and
Don’t include any miscellaneous itemized deductions, which

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is included in the estimates shown in the instructions for their individual

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CAUTION
aren’t allowed deductions in tax years beginning after
December 31, 2017, and before January 1, 2026.
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.
Part III—Investment Interest Expense Deduction If you have comments concerning the accuracy of these time
Line 8 estimates or suggestions for making this form simpler, we would be
Individuals. Generally, enter the amount from line 8 (excluding any happy to hear from you. See the instructions for the tax return with
amount included on Form 6198, line 4—see later) on Schedule A (Form which this form is filed.
1040), line 9, 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