Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Forte's income for the year consists of $120,000 in salary, $1,000 interest income, $1,500 nonqualifying dividends, and $1,100 long-term capital gains. The Forte's expenses for the year consist of $3,000 investment interest expense and $900 tax preparation fees. Assuming that the Forte's marginal tax rate is 30% and they make no special elections, what is the amount of investment interest expense deduction for the year?

Question

Quizplus · Accepted Answer

Investment income of $2,500 ($1,000 + $1,500) ≤ investment interest expense ($3,000). The long-term capital gains are not considered investment income because this income is taxed at a preferential rate.

Brandon and Jane Forte File a Joint Tax Return and Decide