As I understand from posting a prior quesiton, a tax filer with investment interest expense will have no tax liability on short-term capital gains up to the amount of investment interest expense. A tax filer can also elect to use investment interest expense to reduce the tax liability assiciated with long-term capital gains if so desired. In high-tax jurisdictions such as NY, it may make sense for a tax filer to make such election, as realized long-term capital gains would be free of any Federal, State NY, and even the 3.8% federal surchage? Basically, no tax due whatseoever when having short-term capital gains (and even when having long-term capital gains, when making such an election)? Am I reading the code accurately?
In the case of the election, while making the election removed the ability to use the investment interest expense to cover the tax obligation on items normally subject to ordinary income tax rates, in high-tax jurisdictions such as NY, there may be cases where making the election would be highly advantageous if it renders long-term capital gains to be free of taxes from federal, state, and 3.8% surchage.
