1040-US: Elect to include net capital gain and/or qualified dividends in investment income

Alerts and notices

Question

How do I elect to include all or part of the net capital gain from the disposition of investment property and/or qualified dividends in investment income?

Answer

The tax application automatically determines the amount of net capital gain from the disposition of investment property and/or the amount of qualified dividends to include as a component of investment income. The following assumptions are made in determining the elected amount of net capital gain and/or qualified dividends included in investment income.

  • The amount of gains and qualified dividends included on line 4g are only calculated to the extent necessary to deduct all investment interest expenses in the current year.
  • The amount on line 4g is first attributable to net capital gain from property held for investment (line 4e), and then to qualified dividends (line 4b). To elect to treat the amount on line 4g first attributable to qualified dividends, enter X in the Elect qualified dividends before capital gains field in Screen 4952.

To elect a different amount of net capital gain from property held for investment and/or qualified dividends included on line 4g, use the Enter amount to include in investment income (Force) fields in Screen 4952. To force all net capital gains and qualified dividends to be taxed at the reduced capital gain and qualified dividend tax rate, thus excluding the amounts from the calculation of the deduction for investment interest expense, enter 0 (zero) in the Enter amount to include in investment income (Force) fields. Alternatively, to suppress the automatic calculation of line 4g altogether, enter X in the Suppress automatic calculation of line 4g qualified dividend/capital gain election field

Related topic: Investment income and expenses FAQs (1040)

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