Question

In 2020, Susan had interest expense of $58,500 from her investments. Susan's has investment income of $46,500. Of this amount, interest is $15,000, qualified dividends are $9,000, and a net capital gain on the sale of securities is $22,500. What is the maximum amount of Susan's investment interest expense deduction for the current year if she decides to give up the capital gain preferential treatment

Answer 1

Susan

The maximum amount of Susan's investment interest expense deduction for the current year if she decides to give up the capital gain preferential treatment is:

= $46,500.

Step-by-step explanation:

a) Data and Calculations:

Investment interest expense = $58,500

Investment income = $46,500

Makeup of investment income:

Interest = $15,000

Dividends = $9,000

Net capital gain on the sale of securities = $22,500

b) Susan's investment interest expense is the interest amounting to $58,500 that she paid on the money she borrowed to purchase the taxable investments. The amount that Susan can deduct is capped at her net taxable investment income for the year, which totaled $46,500 since she gives up the capital gain preferential treatment. The remaining $12,000 in interest expense can be carried forward to the next fiscal year to reduce her future taxes.