Hi @DefenderCSW
Thank you again for the clarification! When the income is loaned and repaid as an in-lieu payment, it is recharacterized as ordinary income, meaning it is no longer net investment related income. It drops off the investment reporting and ends up being reported directly on Form 1040 as ordinary income. As a result, it will no longer be reported on Form 4952 – Investment Interest Expense Deduction or line 4a – Net investment income, gross income from property held for investment.
Thanks again!
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