Question

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Fortes' income for the year consists of $120,000 in salary, $1,000 interest income, $1,500 non qualifying dividends, and $1,100 long-term capital gains. The Fortes' expenses for the year consist of $3,000 in investment interest expense and $900 in tax preparation fees. Assuming that the Fortes' marginal tax rate is 32 percent and they make no special elections, what is the amount of investment interest expense deduction for the year

Answer 1

Answer: $2500

Explanation:

The amount of investment interest expense deduction for the year will be calculated thus:

The value of interest expense will be:

= Interest income + Non qualifying dividend

= $1000 + $1500

= $2500

It should be noted that the investment interest expenses will be $2500 due to the fact that thus is lesser than Fortes' expenses for the year which is $3,000 in investment interest expense.