Investment Interest Expense

Question 1

Investment Interest Expenses Deductibility

Answer 1

(1) Investment Interest Expense is deductible up to the amount of net investment income. (2) Net Investment Income is the Excess of Investment Income over Investment Expenses. (3) Excess investment interest expense may be carried forward. (4) Interest paid or accrues to purchase or carry tax-exempt investment or a single-premium deferred annuity is not deductible.

Question 2

Investment Income

Answer 2

(1) Investment Income is the gross income from property held for investment (i.e. interest) and the net gain resulting from the disposition. (2) Long-term capital gains and qualifying dividends are included only in the taxpayer elects that the preferential rates not apply.

Question 3

Investment Expenses

Answer 3

(1) Investment Expenses are deductible expenses (other than investment interest) directly connected with the production of investment income after reduction for 2% of AGI-limitation

Question 4

Net Investment Income

Answer 4

(1) Net Investment Income is the excess of investment income over deductible investment expenses. Interest/Income - fees above 2% AGI. (2) Excess expenses can be rolled over