This year, Mr. and Mrs. Lebold paid $3,100 investment interest expense. They earned $4,750 investment income consisting of $1,900 interest and $2,850 qualified dividends, and they incurred no investment expenses. Which of the following statements is true?

Question

Quizplus · Accepted Answer

To deduct the full $3,100 investment interest expense, the Lebolds must have at least $3,100 of investment income taxed at ordinary rates. By electing to treat $1,200 of the qualified dividends as ordinary income, they increase their ordinary investment income to $3,100 ($1,900 interest + $1,200 dividends).

This Year, Mr