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1990, the $10,000 in excess of net investment income is phased
out. Sec. 163(d)(6). For years after 1990, the investment
interest deduction is limited to the taxpayer's net investment
income for the year. Sec. 163(d)(1). The amount of investment
interest not deductible in a year is carried over to the next
15(...continued)
(ii) investment expenses.
(B) Investment income.--The term "investment
income" means the sum of--
(i) gross income (other than gain described
in clause (ii)) from property held for investment,
and
(ii) any net gain attributable to the
disposition of property held for investment.
(C) Investment expenses.--The term "investment
expenses" means the deductions allowed under this
chapter (other than for interest) which are directly
connected with the production of investment income.
(D) Income and expenses from passive activities.-
-Investment income and investment expenses shall not
include any income or expenses taken into account under
section 469 in computing income or loss from a passive
activity.
(E) Reduction in investment income during phase-
in of passive loss rules.--Investment income of the
taxpayer for any taxable year shall be reduced by the
amount of the passive activity loss to which section
469(a) does not apply for such taxable year by reason
of section 469(m). The preceding sentence shall not
apply to any portion of such passive activity loss
which is attributable to a rental real estate activity
with respect to which the taxpayer actively
participates (within the meaning of section 469(i)(6))
during such taxable year.
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