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  • #202079
    ppramanik
    Participant

    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

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  • #777232
    Andyred04
    Participant

    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
    REG 87
    BEC 87
    AUD 96

    Primarily Gleim, supplemented with Ninja Notes & Ninja MCQs

    Missouri CPA as of January, 2017

    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

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