In 2016,Mario earned $9,000 in net investment income and incurred $14,000 of investment interest expense.Mario paid off the loan in early 2017,so he only paid $2,000 of investment interest expense in 2017.He earned $10,000 of net investment income in 2017.How much investment interest expense can Mario deduct in 2017?
A)$2,000
B)$10,000
C)$7,000
D)$0

Question

Quizplus · Accepted Answer

C)Mario has $7,000 of potentially deductible investment interest expense-the $2,000 paid in 2017 and the $5,000 carryover from 2016.The investment interest expense can be deducted up to a ceiling of net investment income which is $10,000.The entire $7,000 investment interest expense available can be deducted in 2017.

In 2016,Mario Earned $9,000 in Net Investment Income and Incurred