Raul is married and files a joint tax return.His current investment interest expense of $95,000 is related to a loan used to purchase a parcel of unimproved land being held as an investment.Income from investments [dividends (not qualified) and interest] total $18,000.Raul paid and deducted $5,000 of real estate taxes on the unimproved land.He also has a $4,500 net long-term capital gain from the sale of another parcel of unimproved land.Raul's maximum investment interest deduction for the year is:

Question

Quizplus · Accepted Answer

The maximum investment interest deduction for the year is calculated as follows:

Investment income: $18,000
Real estate taxes: $5,000
Net long-term capital gain: $4,500
Total: $27,500

This amount is subtracted from the investment interest expense of $95,000, resulting in a maximum investment interest deduction of $67,500. However, there is a further limitation on the deduction based on the taxpayer's adjusted gross income (AGI). In this case, the deduction is limited to 30% of AGI, which is not provided in the question. Therefore, the correct answer is C) $17,500, as it is the only option that falls below the maximum investment income of $27,500.

Raul Is Married and Files a Joint Tax Return