Emeril borrows $340,000 to finance taxable and tax- exempt investments. He incurs $18,000 investment interest expense, allocated equally between the taxable and tax- exempt investments. Ignore any possible investment interest expense limitation. How much of the interest expense is deductible, and where is it deductible?

Question

Quizplus · Accepted Answer

Interest expense related to tax-exempt investments is not deductible. Therefore, only the $9,000 related to taxable investments is deductible, and it is deductible from AGI.

Emeril Borrows $340,000 to Finance Taxable and Tax- Exempt Investments