Question

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Fortes' income for the year consists of $119,900 in salary, $950 interest income, $1,450 nonqualifying dividends, and $950 long-term capital gains. The Fortes' expenses for the year consist of $2,950 in investment interest expense and $890 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

Answer 1

$2,400

Step-by-step explanation:

The computation of the investment interest expense is shown below:

Investment interest expenses is

= Interest Income + Non-qualifying dividends

= $950 + $1,450

= $2,400

We simply added the interest income and the non qualifying dividend so that the investment interest expense could come and the same is considered

Plus the investment interest income is $2,950 which exceeded than the $2,400 so $2,400 would be considered