Question

Matthew borrows $155,000 to invest in bonds. During the current year, his interest on the loan is $15,500. Matthew's taxable interest income from the bonds is $9,300. This is Matthew's only investment income.

a. Calculate Matthew's itemized deduction for investment interest expense for this year. $

b. Is Matthew entitled to a deduction (related to the investment interest expense) in future years? yes/no, the unused deduction of $ may/may not be carried forward as an investment interest deduction in future years.

Answer 1

Part (a)

Calculation of Itemized Deduction for interest expense for this year
Investment Income	$ 9300
Interest Expense	$ 15500
Since the interest expenses are more then the net investment income,we can deduct interest expense up to investment income only
Therefore itemized deductioon amount is ( $ 9300 )
The balance interest expense can be carried forward to next year

Part (b)

Yes

Mathew can carry forward the interest expense unused to next year.But it is up to the investment income only