Taxpayers may make an election to include long-term capital gains and qualified dividends in net investment income and deduct more investment interest expense currently if they are willing to subject these sources of income to ordinary tax rates.

Question

Quizplus · Accepted Answer

This statement is true. Taxpayers can make an election under Section 163(d)(4)(B) of the Internal Revenue Code to include long-term capital gains and qualified dividends in their net investment income, allowing them to deduct more investment interest expense currently. However, this also means that the included long-term capital gains and qualified dividends will be subject to ordinary tax rates instead of the lower capital gains tax rates.

Taxpayers May Make an Election to Include Long-Term Capital Gains