Question

Y shirleyhollandi1y... SU Financial eBook Calculator Exercise 6-32 (Algorithmic) (LO. 3) Tobias has a brokerage account and buys on the margin, which resulted in an interest expense of $38,800 during the year. Income generated through the brokerage account was as follows: Municipal interest Taxable dividends and interest $77,600 388,000 If required, round any division to two decimal places and use in subsequent computation. Round your final answer to the nearest dollar. How much investment interest can Tobias deduct? Feedbac v Cho My Work Certain income, such as interest on municipal bonds, is tax-exempt. Normally, the law also allows the taxpayer to deduct expenses i the production of income.

Answer 1

Solution Given , Interest of $38800. Bepense Interest $ 77600 Municipal and $ 388000 Torable dividends Interest . Step 1 Calculate proportion of Interest Expense deduction : proportion of interest expense deduction Taxable income X100 Total income $ 388000 Note] X 160 $77600 $ 388000 + $3880 X 100 $465600 83.33% Step 2 calculate Investment Interest can deduct by Tobias : Investment interest de deletion by Tobias = Interest expense & proportion of Interest expense deduction. - $39800 x 83.33%. = 32332.04 - 32332 (rounded to the nearest dollar)

continued..... 2 Note is Tax exempt. Municipal Interest Holy $77600