Investment interest expense and Schedule D Page 2

[Aztectax]

This questions is a bit in the weeds.  Preparing a return that has a modest amount of investment interest expense.  Taxpayer has adequate non-qualified dividends and other investment income to cover the investment interest deduction and so no need to file Form 4592.  Proconnect Online seems to be handling that part fine.  However, on the back of Schedule D, Line 20, you are directed to either complete the Qual Div and Cap Gain Tax worksheet when no 25% or 28% gains and not required to file Form 4592 (which is this taxpayer's situation); otherwise you default to a No check box and prepare the Schedule D Tax Worksheet.  Although the taxpayer meets the Yes conditions, Proconnect is checking the No box and preparing the Sched D Tax worksheet.  There is no change to the tax calculated because the Schedule D Tax worksheet shows that no qualified dividend income is being used to cover the interest expense deduction and so the tax calculations are the same for both worksheets but technically, Page 2 of Sched D is incorrect.  Proconnect is not producing the 4952 (appropriately).  Is there a way to override something on the 4952 input screens to force the Yes box on Page 2 of Sched D?

[George4Tacks]

The program is filing 4952, even though technically it does not have to. It files it to show the sometimes dense IRS that the interest is fully deductible. By filing that it also forces the Schedule D question to be NO. This avoids later inquiries by IRS that make your client unhappy and adds to your work load. 

I do not see any override to get rid of 4952. You will send a few more sheets of paper (or pdf) to the government, but they have big storage, so no big deal. 

Short answer to your question: NO 

[itonewbie]

If I understand you correctly, your client doesn't have any LTCG, only ordinary dividends (and perhaps qualified dividends).  If so, you seem to have overlooked the instructions for Line 17, where taxpayers are directed to skip Line 18 through 21, and go directly to Line 22.  That's why neither box on Line 20 is checked.  If your client has qualified dividends, PTO will generate a Capital Gain Tax Worksheet and calculate the tax correctly without impacting the investment interest allowed on Sch A.

In other words, PTO is correct in how the return is prepared, under the circumstances you described.

[AztecTaxDr]

As I said - in the weeds.  This client does have cap gains on 15 and 16, so indeed the answer to 17 is Yes which takes me to 18.  The client has no 28% gains and no unrecap depreciation taxed at 25% so 18 is 0 and 19 is blank.  That brings me to 20 which says "Are lines 18 and 19 both zero or blank and are you not filing Form 4952?"  Even though the client has investment interest expense, they are not required to file a 4952 (because they have ample non-cap gain and qual div income) and the answer should be YES but PTO is saying No and then completing the Sched D tax worksheet and not the Cap Gain and Dividends Tax wkst.  BTW, there is no Form 4952 in the PTO filing (in reply to the other reply post) which is correct on the part of PTO since there is no need for one.  The tax is still correct but the boxes on page 2 of D are wrong.      

[itonewbie]

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@Aztectax wrote:

This questions is a bit in the weeds.  Preparing a return that has a modest amount of investment interest expense.  Taxpayer has adequate non-qualified dividends and other investment income to cover the investment interest deduction and so no need to file Form 4592.  Proconnect Online seems to be handling that part fine.  However, on the back of Schedule D, Line 20, you are directed to either complete the Qual Div and Cap Gain Tax worksheet when no 25% or 28% gains and not required to file Form 4592 (which is this taxpayer's situation); otherwise you default to a No check box and prepare the Schedule D Tax Worksheet.  Although the taxpayer meets the Yes conditions, Proconnect is checking the No box and preparing the Sched D Tax worksheet.  There is no change to the tax calculated because the Schedule D Tax worksheet shows that no qualified dividend income is being used to cover the interest expense deduction and so the tax calculations are the same for both worksheets but technically, Page 2 of Sched D is incorrect.  Proconnect is not producing the 4952 (appropriately).  Is there a way to override something on the 4952 input screens to force the Yes box on Page 2 of Sched D?

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Ah, you didn't mention that the taxpayer has LTCG in your OP.  In that case, I agree that PTO is programmed incorrectly to mark "No" for Line 20.

@IntuitAustin @IntuitBettyJo  Looks like this is a bug in PTO (and likely Lacerte).  Could you please have the programmers take a look?  Thanks!