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4952
OMB No. 1545-0191
Form
Investment Interest Expense Deduction 2006
Attachment
Department of the Treasury © Attach to your tax return.
Internal Revenue Service (99) Sequence No. 51
Name(s) shown on return Identifying number
Section references are to the Internal rules apply to investment interest, personal ● Any interest expense that is capitalized,
Revenue Code unless otherwise noted. interest, trade or business interest, home such as construction interest subject to
mortgage interest, and passive activity section 263A.
General Instructions interest. See Pub. 535, Business Expenses. ● Interest expense related to tax-exempt
interest income under section 265.
Purpose of Form Specific Instructions ● Interest expense, disallowed under section
Use Form 4952 to figure the amount of 264, on indebtedness with respect to life
investment interest expense you can deduct
Part I—Total Investment insurance, endowment, or annuity contracts
for 2006 and the amount you can carry Interest Expense issued after June 8, 1997, even if the
forward to future years. Your investment proceeds were used to purchase any
interest expense deduction is limited to your Line 1 property held for investment.
net investment income. Enter the investment interest expense paid or Property held for investment. Property held
For more information, see Pub. 550, accrued during the tax year, regardless of for investment includes property that
Investment Income and Expenses. when you incurred the indebtedness. produces income, not derived in the ordinary
Investment interest expense is interest paid or course of a trade or business, from interest,
Who Must File accrued on a loan or part of a loan that is dividends, annuities, or royalties. It also
allocable to property held for investment (as includes property that produces gain or loss,
If you are an individual, estate, or a trust, you defined on this page). not derived in the ordinary course of a trade
must file Form 4952 to claim a deduction for or business, from the disposition of property
Include investment interest expense
your investment interest expense. that produces these types of income or is
reported to you on Schedule K-1 from a
Exception. You do not have to file Form 4952 partnership or an S corporation. Include held for investment. However, it does not
if all of the following apply. amortization of bond premium on taxable include an interest in a passive activity.
● Your investment income from interest and bonds purchased after October 22, 1986, but Exception. A working interest in an oil or
ordinary dividends minus any qualified before January 1, 1988, unless you elected to gas property that you held directly or through
dividends is more than your investment offset amortizable bond premium against the an entity that did not limit your liability is
interest expense. interest payments on the bond. A taxable property held for investment, but only if you
bond is a bond on which the interest is did not materially participate in the activity.
● You do not have any other deductible includible in gross income.
investment expenses.
Investment interest expense does not Part II—Net Investment
● You do not have any carryover of disallowed
investment interest expense from 2005.
include any of the following: Income
● Home mortgage interest. Line 4a
Allocation of Interest ● Interest expense that is properly allocable
Gross income from property held for
to a passive activity. Generally, a passive
Expense activity is any trade or business activity in investment includes income, unless derived in
the ordinary course of a trade or business,
If you paid or accrued interest on a loan and which you do not materially participate and
from interest, ordinary dividends (except
used the loan proceeds for more than one any rental activity. See the Instructions for
Alaska Permanent Fund dividends), annuities,
purpose, you may have to allocate the Form 8582, Passive Activity Loss Limitations,
and royalties. Include investment income
interest. This is necessary because different for details.
For Paperwork Reduction Act Notice, see back of form. Cat. No. 13177Y Form 4952 (2006)
2
I.R.S. SPECIFICATIONS TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 4952, PAGE 2 of 2
MARGINS: TOP 13 mm (1⁄ 2 "), CENTER SIDES. PRINTS: HEAD to HEAD
PAPER: WHITE WRITING, SUB. 20. INK: BLACK
FLAT SIZE: 203 mm (8") 3 279 mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT