[ppramanik]

Can someone explain why A is the correct answer?

An individual taxpayer reports the following information:

U.S. Treasury bond income $100

Municipal bond income $200

Rental income$500

Investment interest expense $1,000

What amount of investment interest can the taxpayer deduct in the current year?

a. $100

b. $1,000

c. $300

d. $800

[Andyred04]

Investment interest expense can only be deducted to the extent of investment income. Muni bond income is not taxable, therefore interest expense is not deductible, and rental income is not interest. Therefore, you can only deduct the investment interest expense to the extent of the investment income on the US T bonds.

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[Author]

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