Question

Schedule D tax worksheet not using Form 4952 line 4g

Forum|Forum|5 years ago
May 14, 2021
1 reply
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Hello,

I am using turbo tax desktop version for Windows, and when I elect to treat part of my capital gains as investment income (Form 4952 line 4g), turbo tax does not automatically update schedule D tax worksheet (lines 3 and 4). I can override the values manually (to match form 4952), but I am afraid turbo tax might not do proper calculations after that.

Can someone please confirm that my expectations are correct (that line 4g from form 4952 should be automatically included in schedule D tax worksheet) and suggest how I should proceed?

Thank you,

Leonardo.

M

Mike9241

The qualified dividends and net capital gain that you elect to
include in investment income on line 4g aren’t eligible to be
taxed at the qualified dividends or capital gains tax rates.
You should consider the tax effect of using the qualified
dividends and capital gains tax rates before making this
election. Once made, the election can be revoked only with IRS consent.
To make the election, enter on line 4g the amount you elect to include
in investment income (don’t enter more than the sum of lines 4b and 4e).
Also enter this amount on whichever of the following applies.
• The Schedule D Tax Worksheet, line 3.

in other words, investment income that is neither qualified dividends nor long-term capital gains is used first to allow investment interest expense. if these aren't sufficient you can elect to use your qualified dividends and L-T capital gains to allow more of the investment interest expense.

any qualified dividends or LTCG used to increase the investment interest expense deduction do not get the preferred rate but are tax as part of ordinary income.