Walter pays a financial adviser $2,100 to help him manage his investment portfolio during the current year.Walter receives $5,000 in interest from investments in General Motors and Xerox bonds,and $2,500 in interest from investments in City of San Francisco bonds.How much may Walter deduct for the current year?
A)$- 0 -
B)$ 700
C)$1,050
D)$1,400
E)$4,200

Question

Quizplus · Accepted Answer

Walter can deduct the amount paid to the financial adviser as an investment expense, which is subject to a 2% of adjusted gross income (AGI) limitation. Assuming Walter's AGI is at least $105,000 ($2,100 / 0.02), he can deduct $1,400 [$2,100 - ($105,000 x 0.02)]. The interest income from the investments is not deductible since it is included in Walter's gross income.

Walter Pays a Financial Adviser $2,100 to Help Him Manage