Purchase Solution

Investment Interest Deductible

Not what you're looking for?

Ask Custom Question

Chris has a brokerage account and buys on the margin, which resulted in an interest expense of $15,000 during the year. Income generated through the brokerage account was as follows:

Municipal interest $40,000
Taxable dividends and interest $160,000

How much investment interest can Chris deduct?

Purchase this Solution
Solution Summary

This solution describes how much investment interest is tax deductible in a given case.

Solution Preview

Chris had total income of $200,000 from both investments combined. Municipal Interest is tax free so interest and expenses incurred pursuant to this revenue generation is not deductible. However, the expenses incurred relative to the $160,000 in revenue is deductible.

The IRS allows for Chris to make ...

Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • Explain interest expense deduction on Form 1040

    Net investment income=7000-500=$6500. So $6500 investment interest is deductible. $4000 home mortgage loan interest is deductible. $2500 interest on qualified education loans is deductible. Personal interest expense($1000) is not deductible.

  • Tax: unreasonable compensation; expense for medical, taxes

    Ted incurs $2,100 interest on his automobile loan, $120 interest on a loan to purchase stereo equipment, and $630 interest on credit cards, and $1,100 investment interest. Ted has net investment income of $750.

  • Tax Questions... Multiple Choice

    Personal interest is not deductible. Investment interest is deductible to the extent that investment doesn't incur a loss, so only $7,000 of the $10,000 investment interest is deductible. Home mortgage interest is deductible. 4) A.

  • Computing Taxable Income and Deductions For/From AGI

    Decline in value of stock held in individual's investment portfolio $7,000 This is an unrealized loss. Unrealized losses are not tax-deductible.

  • During 2004, Sophie paid the following interest charges

    The only kind of interest allowed for deduction in the US are due to home mortgage and investment interest. Thus the interest on car and student loan cannot be accounted for. So the amount deductible is 5000. Answer is B.

  • Itemized deductions: which interest paid is deductible

    Note 2: Interest on personal credit cards has been non-deductible for many years. Note 3: Investment interest is deductible to the extent of investment earnings unless the interest is paid on funds used to purchase tax exempt securities.

  • Passive Activities and Alternative Minimum Tax

    Adjusted basis in this investment is $42,000. Losses from prior years that were not deductible due to the passive loss restrictions total $48,000. B. Adjusted basis in this investment is $90,000.

  • Mortgage Interest and Corporate Interest

    Discuss the support that Donald will need to defend his position that the interest is investment related and should be deductible for tax purposes. 4.

  • Cost of debt and discount rate

    It is always taken after tax cost as the interest is tax deductible. Hence debt reduces a company's tax liability because interest payments are deductible expenses. Thus they are taken after tax.

View More Related Solutions