In the current year,Julia earns $9,000 in net investment income and incurs $14,000 of investment interest expense.What is the maximum amount of investment interest expense she is allowed to deduct this year?
A)$0
B)$3,000 deductible this year; $11,000 carried forward to next year
C)$9,000 deductible this year; $5,000 carried forward to next year
D)$14,000 deductible this year; nothing to be carried forward to next year

Question

Quizplus · Accepted Answer

The maximum amount of investment interest expense Julia can deduct in the current tax year is limited to her net investment income of $9,000. However, any investment interest expense that is not deductible can be carried forward to future tax years. In this case, $5,000 of the investment interest expense will need to be carried forward to the next year since her net investment income is only $9,000. Therefore, the best choice is C, where $9,000 of the investment interest expense is deductible this year and $5,000 is carried forward to the next year.

In the Current Year,Julia Earns $9,000 in Net Investment Income