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Author: gdefelice Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Form 4952 question Date: 4/10/2008 12:37 AM
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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 $5000.00

Assume that all investment interest expense was incurred on monies used to buy common stocks.

Assume that my net long-term capital gains amount to $5000.00

Assume that my qualified dividends amount to $5000.00

Assume 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.pdf

suggests (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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