Form 4952 (investment interest expense deduction) question

Apr 01, 2009 1 Replies
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My broker charged me about $800 of margin interest last year. My broker also gave me about $150 of interest income last year, presumably for having cash sit in the account (and also possibly for holding profitable short positions, although I'm not 100% certain they pay interest for that).



So I will include the $800 of margin interest on line 1 of Form 4952. Can I include the $150 of interest income somewhere in the Net Investment Income section?



I also had about $100 of interest income from my checking account and money market account. Does that count as Net Investment Income?



Basically, I would like to include everything on line 8a (taxable interest) of Form 1040 in the Net Investment Income section of Form



4952. Can I do that?
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A

On the first page of the 4952, it tells you the definition of Line 4a, Gross Income from Property Held for Investment. It includes interest income that does not derive from a trade or business. That's where you add up your bank interest and the broker interest. That line also includes ordinary dividends and a whole bunch of other stuff. See the 4952 instructions that come with the form.

You are correct that the margin interest goes on Line 1 only if it represented investment interest expense. E.g., If you borrowed on your margin account to buy a personal car, then that interest is nondeductible personal interest. If you borrowed on your margin account to buy securities, that is investment interest.

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