You may need two copies of Form 4952: one for the actual computation of investment interest expense, and a second copy for the recomputation for the Alternative Minimum Tax.
We use copy 1 as the "actual" copy and copy 2 for the recomputation for the Alternative Minimum Tax. The bottom line on copy 1 carries to Schedule A.
The difference between the bottom line on copy 1 and the bottom line on copy 2 carries to Form 6251 (Alternative Minimum Tax), as the adjustment in investment interest expense deduction due to the Alternative Minimum Tax.
Investment interest expense is interest paid on a loan that relates to property held for investment. Property held for investment generally includes property that produces income (other than in the regular course of a trade or business) from interest, dividends, annuities, or royalties. Investment interest doesn't include:
Home mortgage interest
Interest expense related to tax-exempt interest income
Interest allocable to a passive activity
Interest that is capitalized
We carry the taxable dividend and interest income from Schedule B.
If you have taxable dividend and interest income shown on a K-1 worksheet, those amounts will carry first from the K-1 worksheet to Schedule B, and from there to this form.
Net capital gain is net long-term capital gain minus net short-term capital loss. We use the figures from Schedule D as the starting point for this calculation. We subtract any short- or long-term gain from the sale of a home (Sale of Home Worksheet) and long-term gain from Form 4797. Then, we net the adjusted short- and long-term gain/loss against each other. Net capital gain from the disposition of investment assets is the smaller of the net figure and net long-term capital gain.
If you reported a sale or disposition of an asset on Schedule D that was not an investment asset and the transaction was not reported on the Sale of Home Worksheet or 4797, you will have to override our entry for net capital gain and net gain.
We automatically limit your election to the smaller of the amount on line 4d and 4e.
Line 5c is calculated as the smaller of Schedule A, line 27 or the investment expenses included on line 23 of Schedule A. We calculate this latter number as the total of lines 23c, 23d, 23h and 23j of Schedule A, from the mini-worksheet for line 23.
If there are any investment expenses that are not accounted for by this calculation, override line 5c of Form 4952, or enter any adjustments on line 5b of Form 4952. (Also, please feel free to drop us a line--we'd be happy to add your situation to our list of calculations to automate.)
If any portion of the deductible investment interest expense is attributable to an activity for which you're not at risk, you must also use Form 6198, "At-risk Limitations," to figure your deductible investment interest expense.
Figure out how much of your allowable investment interest expense (line 8 of Form 4952) is attributable to the activities for which you were not entirely at risk. Enter that portion on line 4 of Form 6198. Then override line 8 of Form 4952 to reduce the amount on that line by the amount you entered on Form 6198.