A taxpayer has Net Investment Income of $5,000 and Investment Interest Expense of $8,000. What is the deduction allowed?

Answer options:

$8,000

$5,000

$3,000

How to approach this question

Investment Interest Deduction is limited to Net Investment Income. Excess carried forward.

Full Answer

B.$5,000✓ Correct

IRC §163(d). The deduction for investment interest is limited to the amount of net investment income ($5,000). The remaining $3,000 is carried forward.

Common mistakes

Deducting full interest.

Question 63 All questions Question 66

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