Form 4952a - Investment Interest Expense Deduction - 2013

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Alabama Department of Revenue
FORM
XX0013491283
2013
4952A
Investment Interest
Expense Deduction
ATTACH TO YOUR TAX RETURN
Name(s) as shown on your return
Identifying number
Type of return . . . . . . . . . . . . . .
Individual . . . . . . . . . . . . .
Estate . . . . . . . . . . . . . . .
Trust
1
1 Interest expense on investment debts paid or accrued in 2013. See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
2 Disallowed investment interest expense from 2012 Form 4952A, line 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
3 Total investment interest expense. Add lines 1 and 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
4 Net investment income. See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
5 Disallowed investment interest expense to be carried forward to 2014. Subtract line 4 from line 3. If zero or less, enter –0–. . . . . . .
6
6 Investment interest expense deduction. Enter the smaller of line 3 or line 4. See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL INSTRUCTIONS
LINE 4 – NET INVESTMENT INCOME
Net investment income is the excess, if any, of investment income over in-
PURPOSE OF FORM
vestment expenses. Include investment income and expenses reported to you
Interest expense paid by an individual, estate, or a trust on a loan that is
on Schedule K-1 from a partnership or an S corporation. Also include net in-
allocable to property held for investment (defined below), may not be fully de-
vestment income from an estate or a trust.
ductible in the current year. Form 4952A is used to figure the amount of in-
INVESTMENT INCOME
vestment interest expense deductible for the current year and the amount, if
Investment income includes income (not derived in the ordinary course of
any, to carry forward to future years.
a trade or business) from interest, dividends (reduced by qualified dividends
For more details, refer to Federal Publication 550, Investment Income and
per federal instructions), annuities, royalties, and net gain from the disposition
Expenses.
of property held for investment (including capital gain distributions from mutual
CAUTION: The investment interest deduction for Alabama is computed
funds).
as if the federal passive income limitation did not exist. Net capital gain
PROPERTY HELD FOR INVESTMENT
from the disposition of investment property is included in investment in-
Property held for investment includes property that produces investment in-
come for Alabama purposes.
come. Property held for investment also includes an interest in an activity of
conducting a trade or business in which you did not materially participate.
WHO MUST FILE
INVESTMENT EXPENSES
If you are an individual, estate, or a trust, and you claim a deduction for in-
Investment expenses are your allowed deductions, other than interest ex-
vestment interest expense, you must complete and attach Form 4952A to your
pense, directly connected with the production of investment income. For ex-
tax return unless all of the following apply:
ample, depreciation or depletion allowed on assets that produce investment
• Your only investment income was from interest or dividends;
income is an investment expense.
• You have no other deductible expenses connected with the production of in-
If you have investment expenses that are included as a miscellaneous item-
terest or dividends,
ized deduction on line 21 of Schedule A (Form 40), or line 26 of Schedule A
• Your investment interest expense is not more than your investment income;
(Form 40NR), you may not have to use all of the amount for purposes of line
and
4 of Form 4952A. The 2% adjusted gross income limitation on Schedule A
• You have no carryovers of investment interest expense from 2012.
may reduce the amount.
ALLOCATION OF INTEREST EXPENSE UNDER TEMPORARY FEDERAL
To figure the amount to use, compare the amount of the investment ex-
REGULATIONS SECTION 1.163-8T
penses included on line 21 of Schedule A (Form 40) with the total miscella-
If you paid or accrued interest on a loan and you used the proceeds of the
neous expenses on line 24 of Schedule A. If you filed Schedule A (Form
loan for more than one purpose, you may have to allocate the interest paid.
40NR), compare the amount on line 26 with the amount on line 29. The smaller
This is necessary because of the different rules that apply to investment in-
of the investment expenses included on line 21 (or line 26) or the total of line
terest, personal interest, trade or business interest, and home mortgage in-
24 (or line 29) is the amount to use to figure the investment expenses from
terest. See Federal Publication 550, Investment Income and Expenses.
Schedule A for line 4.
SPECIFIC INSTRUCTIONS
Example: Assume line 21 of Schedule A (Form 40) includes investment ex-
LINE 1 – INVESTMENT INTEREST EXPENSE
penses of $3,000, and line 24 is $1,300 after the 2% adjusted gross income
limitation. Investment expenses of $1,300 are used to figure the amount of in-
Enter the investment interest paid or accrued during the tax year, regard-
vestment expense for line 4. If investment expenses of $800 were included on
less of when the indebtedness was incurred. Include interest paid or accrued
line 21 and line 24 was $1,300, investment expenses of $800 would be used.
on a loan (or part of a loan) that is allocable to property held for investment.
If you have investment expenses reported on a form or schedule other than
Be sure to include investment interest expense reported to you on Sched-
Schedule A, include those expenses when figuring investment expenses for
ule K-1 from a partnership or an S corporation. Include amortization of bond
line 4.
premium on taxable bonds purchased after October 22, 1986, but before Jan-
LINE 6 – INVESTMENT INTEREST EXPENSE DEDUCTION
uary 1, 1988, unless you elected to offset amortizable bond premium against
This is the amount you may deduct as investment interest expense.
the interest payments on the bond. A taxable bond is a bond on which the in-
INDIVIDUALS
terest is includible in gross income.
Enter the amount from line 6 on line 13 of Schedule A (Form 40 or 40NR),
Investment interest expense does not include the following:
even if all or part of it is attributable to a partnership or an S corporation. How-
• Home mortgage interest;
ever, if any portion of this amount is attributable to royalties, enter that portion
• Any interest expense that is capitalized, such as construction interest sub-
of the interest expense on Schedule E (Form 40 or 40NR).
ject to Federal Section 263A.
ESTATES AND TRUSTS
Enter on Form 41, Page 3, Schedule B, Column C, Line 10.

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