For the current tax year, David, a married taxpayer filing a joint return, reported the following: $\begin{array}{llcc}
\text { Investment income from interest} &\$24,000\
\text { Investment expenses other than interest} &\$3,000\
\text {Interest expense on funds borrowed 10 years ago to purchase investment } &\
\text {property } &\$70,000\
\end{array}$
What is the maximum amount that David can deduct in the current year as investment interest expense?
A)$7,000
B)$20,000
C)$21,000
D)$24,000
E)None of these

Question

For the current tax year, David, a married taxpayer filing a joint return, reported the following: $\begin{array}{llcc}
  \text {  Investment income from interest} &\$24,000\
 \text {  Investment expenses other than interest} &\$3,000\
 \text {Interest expense on funds borrowed 10 years ago to purchase investment  } &\
 \text {property } &\$70,000\
\end{array}$
 What is the maximum amount that David can deduct in the current year as investment interest expense?
A)$7,000
B)$20,000
C)$21,000
D)$24,000
E)None of these

Quizplus · Accepted Answer

According to the information given, David reported $60,000 in investment income and $39,000 in investment interest expense. The maximum amount that he can deduct as investment interest expense is equal to his net investment income, which is $60,000 - $3,000 (the limit for other deductions) = $57,000. However, the investment interest expense is limited to the amount of investment income, so the maximum amount that David can deduct as investment interest expense is $39,000.

For the Current Tax Year, David, a Married Taxpayer Filing