28. Brandon and Jane Forte file a joint tax return and decide to itemize their d

Question

28. Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Forte's income for the year consists of $119,000 in salary, $500 interest income, $1,000 nonqualifying dividends, and $500 long-term capital gains. The Forte's expenses for the year consist of $2,500 investment interest expense and $800 tax preparation fees. Assuming that the Forte's marginal tax rate is 30% and they make no special elections, what is the amount of investment interest expense deduction for the year?

Multiple Choice

Zero; investment interest expense is below two percent of AGI.

None of the choices are correct.

$1,500.

$500.

$2,500.

Explanation / Answer

Solution:-

Investment interest expenses = Interest Income + Nonqualifying dividends

= $ 500 + $1000

Investment interest expenses = $1,500

Therefore, $1500 <= investment interest expenses $2,500.

The long term capital gains are not considered in investment income because this income is taxed at a preferential rate.

So Investment interest expenses deduction for the year is $ 1,500 .

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