Anyone have advice on the following: I have investment interest expense. I have no net short-term capital gains. I have no non-qualified interest or dividends. However, I do have net long-term capital gains. I also have qualified dividends. For the 2007 tax year: Assume that my investment interest expense amounts to $5000.00Assume that all investment interest expense was incurred on monies used to buy common stocks.Assume that my net long-term capital gains amount to $5000.00Assume that my qualified dividends amount to $5000.00Assume my marginal federal bracket is 33%. Assume that I live in the state of CA.The following form: http://www.irs.gov/pub/irs-pdf/f4952.pdfsuggests (on the bottom of column 1 on page 2) that I can use line "g" to elect to treat some (or all) of either or both of my capital gains and/or my qualified dividends as "investment income". My understanding is that if I choose to do this, I can then deduct my investment interest expense against the portion of my qualified dividends that I so choose to treat this way. Why wouldn't I do this? What are the downsides? Can't I shield my qualified dividends?
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