Investment interest expense & NOL

[cientax]

Same client as in earlier post, (house flipper; buys, improves, builds and sells). He has a line of credit with the bank that he uses for purchasing materials for the houses. Is this considered investment interest and deducted using Form 4952 then to Sch-A or is it Sch-C deduction or is it to be included in COGS with materials? We have NOL and not sure if it is to be included on line 6 of the NOL worksheet "Nonbusiness Deductions".

Please advise on where to include this, For now we have it on Form 4952 and Sch-A as itemized deduction which will then be disallowed for the NOL. We really don't want a larger NOL. He is very productive in his business but with the economic slump and not many buyers, he has a loss for 2007. His inventory is actually what gives him a loss otherwise he would have a good gain.

[kcjenkins]

Interest on this sort of loan is normal business expense, so I'd put it on the C on Line 16.