Ramon incurred $83,100 of interest expense related to his investments this year. His investment income included $34,500 of interest and a $37,500 net capital gain on the sale of securities. Ramon has asked you to compute the amount of his deduction for investment interest, taking into consideration any options he might have. What is the maximum amount of Ramon's investment interest expense deduction in the current year?

Question

Quizplus · Accepted Answer

The maximum amount of Ramon's investment interest expense deduction in the current year is $72,000. This is calculated as his investment income ($34,500 + $37,500 = $72,000) multiplied by the interest expense limitation of investment income rules under IRC Section 163(d)(3), which allows a taxpayer to deduct investment interest expense only to the extent of their net investment income. Therefore, Ramon can deduct up to $72,000 of his $83,100 investment interest expense, resulting in a deduction of $72,000 and carryforward of the remaining $11,100 to future years.

Ramon Incurred $83,100 of Interest Expense Related to His Investments