Question

Barb borrowed $200,000 to acquire corportate stock to be held for investment purposes and paid interest...

Barb borrowed $200,000 to acquire corportate stock to be held for investment purposes and paid interest of $14,000 on the loan. She has an AGI of $195,000 for the year. Other items related to Barb's invesments include the following:

Investmet income:$9,000

Long term capital gain on sale of stock: 5,500

Barb is unmarreid and itemizes her deductions. What is the maximum amount of Barb's investment and interest expense deduction in the current year?

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Answer #1
Calculation of current year maximum investment interest deduction for Barb
Investment income $9,000
Current investment interest deduction for current year limited to current year net investment income $9,000
Balance of interest expenses $ 5,000 will be carried forward to the next tax year.
(It is assumed that Barb has not elected to treat the long term capital gain as investment incoem if she treated it as investment income then total investment income is $14,500 and the whole interest expense $14,000 will be allowed as deduction.)
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