- 17 -
1999 2000 2001
Investment interest expense $63,807 $92,036 $2,779
Disallowed investment interest expense from
prior taxable year —-- 58,668 146,217
Total investment interest expense 63,807 150,704 148,996
Gross income from property held for investment 5,139 4,487 453
Net gain from the disposition of property held
for investment --- --- ---
Net investment income 5,139 4,487 453
Disallowed investment interest expense to be
carried forward to the next taxable year 58,668 146,217 148,543
Investment interest expense deduction 5,139 4,487 453
D. Conclusion
We hold that “net gain”, as that term is used in section
163(d)(4)(B)(ii)(I), requires inclusion of petitioners’ capital
losses and capital loss carryovers for purposes of calculating
the section 163(d)(1) limitation on the investment interest
expense deduction. We hold further that petitioners’ investment
interest expense deductions for 1999, 2000, and 2001 are limited
to $5,139, $4,487, and $453, respectively. In view of the
foregoing, we sustain respondent’s determination on the disputed
issue.
We have considered all of the other arguments made by
petitioners and, to the extent that we have not specifically
addressed them, we find them to be without merit.
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