Answer (D) is correct.
Sec. 163(d) limits the deduction on investment interest to the amount of net investment income. Investment income includes gross income from property held for investment and any net gain attributable to the disposition of property held for investment, to the extent that such amounts are not derived from the conduct of a trade or business. Capital gain from disposition of investment property is generally not considered investment income. However, individuals may elect to treat the gain as investment income by paying taxes at the ordinary rate. Roth had investment income of $49,000 ($24,000 + $25,000) and investment expenses of $4,000, or net investment income of $45,000. His investment interest deduction is limited to $45,000. The $25,000 of disallowed investment interest ($70,000 – $45,000) may be carried over and treated as investment interest paid or accrued in the succeeding taxable year
FAR 05/27/14; 786/110 - Done !
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