Investment expenses treated as miscellaneous itemized deductions do not include:

Question

Investment expenses treated as miscellaneous itemized deductions do not include:

expenses incurred to generate tax-exempt income

investment interest expense

expenses for investment advice

expenses incurred to generate tax-exempt income and investment interest expense

investment interest expense and expenses for investment advice

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2013. On December 31, 2015 she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2016 for $3,000. What is Ms. Fresh's recognized loss on her 2015 sale and what is her basis in her 1,000 shares purchased in 2016?

$-0- LTCL and $3,500 basis

$200 LTCL and $3,300 basis

$300 LTCL and $3,200 basis

$400 LTCL and $3,100 basis

$500 LTCL and $3,000 basis

When calculating net investment income, gross investment income includes:

interest income

net short-term capital gains

non-qualified dividends

royalty income

All of these

Alain Mire files a single tax return and has adjusted gross income of $304,000. His net investment income is $53,000. What is the additional tax that Alain will pay on his net investment income for the year?

Zero

$2,014

$3,952

$1,938

None of these

Explanation / Answer

Answer1.

The investment expenses which are treated as miscellaneous itemized deductions do not include expenses incurred to generate tax-exempt income and investment interest expense.

This is because as per rule The Investment expenses other than interest are classified or included as miscellaneous itemize deductions but these are subject to 2% AGI floor. Interest on investment and other investment expenses are tax deductible and are included in itemize deductions.

Hence, the correct option Is Statement D that is expenses incurred to generate tax-exempt income and investment interest expense

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