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Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The...

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Fortes' income for the year consists of $119,100 in salary, $550 interest income, $1,050 nonqualifying dividends, and $550 long-term capital gains. The Fortes' expenses for the year consist of $2,550 in investment interest expense and $810 in tax preparation fees. Assuming that the Fortes' marginal tax rate is 32 percent and they make no special elections, what is the amount of investment interest expense deduction for the year?

  • $0.

  • $2,550.

  • None of the choices are correct.

  • $1,600.

  • $550.

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Answer #1

Ans: The correct option for the answer is option D i.e. $1,600

Investment interest expense = Interest income+ Non qualifying dividends

= $550+$1,050

= $1,600 which is less than given $2,550 investment interest expense deduction:

And as we know, the long term capital gains are not considered as investment income because the income is taxed at preferential rate

So investment expense deduction for the year will be $ 1,600

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