Doug and Sue Click file a joint tax return and decide to itemize their deductions.The Click's income for the year consists of $90,000 in salary,$2,000 interest income,$800 long-term capital loss.The Click's expenses for the year consist of $1,500 investment interest expense.Assuming that the Click's marginal tax rate is 35%,what is the amount of their investment interest expense deduction for the year?

Question

Quizplus · Accepted Answer

The investment interest expense deduction is limited to the amount of investment income the Clicks earned during the year, which is $2,000 in interest income minus the $800 long-term capital loss, resulting in $1,200 of net investment income. Since the Click's investment interest expense of $1,500 exceeds their net investment income, they can only deduct up to the amount of their net investment income, which is $1,200. Therefore, the Click's investment interest expense deduction for the year is $1,200.

Doug and Sue Click File a Joint Tax Return and Decide