Section references are to the Internal Revenue Code unless otherwise noted.
Note Section 265 (with respect to the nondeductibility of expenses and interest relating to tax-exempt income) shall be operative; except that it shall not apply to expenses and interest for royalties and other income derived from any patents, copyrights, and trade secrets by an individual or a qualified high technology business as defined in section 235-7.3, Hawaii Revised Statutes. Such expenses shall be deductible.
Purpose of Form
Interest expense paid by an individual, estate, or a trust on a loan that is allocable to property held for investment (defined on page 2) may not be fully deductible in the current year. Form N-158 is used to figure the amount of investment interest expense deductible for the current year and the amount, if any, to carry forward to future years. For more information, get federal Publication 550, Investment Income and Expenses.
Who Must File
If you are an individual, estate, or a trust, and you claim a deduction for investment interest expense, you must complete and attach Form N-158 to your tax return, unless all of the following apply: •• Your investment interest expense is not more than your investment income from interest and ordinary dividends.
• You have no other deductible investment expenses.
• You have no disallowed investment interest expense from 2013.
For more information please see form N158 instructions.