Tax Planning 10- Investment interest expense classifications and limitations

Question 1

Investment interest expense is reported on Schedule A
as an_____ _____

Answer 1

itemized deduction

Question 2

Generally, characterization as investment interest
expense is based on the usage of funds, not the type of
_________(except when tax exempt bonds are used)

Answer 2

collateral

Question 3

Investment interest expense is only deductible to the
extent of _____ ________, using Form 4952

Answer 3

net investment income

Question 4

Any investment interest expense not currently
deductible may be carried forward and included in the
interest expense deduction calculation for the
_______ ________

Answer 4

subsequent year

Question 5

Investment interest expense carry forward is

Answer 5

unlimited

Question 6

Investment interest does not include ___ _____ ____ (see Mortgage Interest Deduction) or interest that is taken into account in applying the passive activity rules (see Passive Loss Limitations).

Answer 6

Investment interest does not include qualified residence interest (see Mortgage Interest Deduction) or interest that is
taken into account in applying the passive activity rules (see Passive Loss Limitations).

Question 7

What election can be made on Tax Form 4952 regarding investment interest expense?

Answer 7

Foregoing the preferential tax treatment

Question 8

Debt incurred after construction or substantial improvement begins may
qualify to the extent of construction or improvement expenditures made not more than
_____ months before the debt is incurred.

A home under construction may be treated as a qualified residence for a
period of up to 24 months before its completion, provided it becomes a
qualified residence at the time it is ready for occupancy.

Answer 8

Debt incurred after construction or substantial improvement begins may
qualify to the extent of construction or improvement expenditures made not more than
24 months before the debt is incurred.

A home under construction may be treated as a qualified residence for a
period of up to 24 months before its completion, provided it becomes a
qualified residence at the time it is ready for occupancy.

Question 9

A debt may be treated as incurred in acquiring a qualified residence to the extent
expenditures are made to acquire the residence within ______ days before or after the debt
is incurred.

Answer 9

A debt may be treated as incurred in acquiring a qualified residence to the extent
expenditures are made to acquire the residence within 90 days before or after the debt
is incurred.

Question 10

What are the differences in calculating NII (net Investment Income for the 3.8 Surtax vs the investment interest expense deduction?

Answer 10

1. Treatment of long-term capital gains
2. Rents from non-active trade/ business included in NII for 3.8 surtaxes but not for the
   investment interest deduction

Question 11

Pease Limitation

Answer 11

Phase out of certain itemized deductions

Question 12

Deductions - are these deductions subject to phaseout?
Taxes
Mortgage interest
Charitable gifts
Miscellaneous itemized deductions

Answer 12

Subject to Phase Out

Question 13

Deductions - are these deductions subject to phaseout?
Medical
Investment interest
Casualty and theft losses

Answer 13

NDeductions - are these deductions subject to phaseout?