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Changes to 2007 Form

Form 3526 – Investment Interest Expense Deduction

The revised Internet version is available for download as of 02/26/2008

Revision Details: 1) To add the letter (b) to line 4 which was erroneously removed during typeset. 2) Rearranging paragraph to move the use language to the beginning. 3) (a) To add the word "line" to the title. (b) To add the form (1040) to the instructions. (c) To correct the line references to the federal Form 1040, Schedule A.

  • 1) Page 1, line 4b 2) Page I , 3rd column 3) Page 2, 1st column, 2nd column, last line, and 3rd column, 3rd and 4th paragraph, and page 508 of the Package X

Previously read:

1) Net capital gain from the disposition of property held for investment, See instructions ... 4
2)Interest expense paid by an individual, estate, or trust on a loan allocable to property held for investment may not be fully deductible in the current year. Use from FTB 3526, investment interest Expense Deduction, to figure the amount of investment interest expense deductible for the current year and the amount, if any, to carry forward to future years.
3) (a) Specific lnstructions
(b) For more information about passive activities, get the instructions for federal Schedule E, Supplemental Income and Loss.
(c) If you have investment expenses that are included as a miscellaneous itemized deduction on federal Schedule A (Form 1040), line 22, the two percent adjusted gross income limitation on federal Schedule A (Form 1040), line 25 Include on form FTB 3526, line 5, the smaller of either the investment expenses included on federal Schedule A (Form 1040), line 22,or the total federal Schedule A (Form 1040), line 33.

Revised to:

1) Net capital gain from the disposition of property held for investment, See instructions … 4b
2) Use from FTB 3526, investment interest Expense Deduction, to figure the amount of investment interest expense deductible for the current year and the amount, if any, to carry forward to future years. Interest expense paid by an individual, estate, or trust on a loan allocable to property held for investment may not be fully deductible in the current year.
3) (a) Specific Line lnstructions
(b) For more information about passive activities, get the instructions for federal Schedule E, (Form 1040).
(c) If you have investment expenses that are included as a miscellaneous itemized deduction on federal Schedule A (Form 1040), line 23, the two percent adjusted gross income limitation on federal Schedule A (Form 1040), line 26 Include on form FTB 3526, line 5, the smaller of either the investment expenses included on federal Schedule A (Form 1040), line 23,or the total federal Schedule A (Form 1040), line 27.

Revision 3(c) - if the taxpayers followed our instructions they would not included their investment expense from federal form 1040, Schedule A on FTB form 3526, line 5 resulting in a smaller investment expense deduction and higher tax liability.

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