Final answer:
Taxpayers can deduct investment interest expenses, but these deductions are limited to their net investment income for the year.
Step-by-step explanation:
When taxpayers borrow money to acquire investments, the interest expense they pay on the loan is an investment interest expense, and the deduction is limited to the taxpayer's net investment income for the year. Therefore, the correct answer is (a) investment interest, net investment income. Tax laws are designed to prevent taxpayers from deducting interest expenses greater than the income generated from their investments. This is an example of regulations that are in place to ensure that deductions reflect actual economic activity and to discourage tax avoidance strategies.