Brandon and Jane Forte File a Joint Tax Return and Decide

question 86

Multiple Choice

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Fortes' income for the year consists of $120,000 in salary, $1,000 interest income, $1,500 nonqualifying dividends, and $1,100 long-term capital gains. The Fortes' expenses for the year consist of $3,000 in investment interest expense and $900 in tax preparation fees. Assuming that the Fortes' marginal tax rate is 32 percent and they make no special elections, what is the amount of investment interest expense deduction for the year?

• A)$0.
• B)$1,000.
• C)$2,500.
• D)$3,000.
• E)None of the choices are correct.

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Definitions:

Tax Returns

Documents filed with the IRS that report income, expenses, and other pertinent tax information. Tax returns determine tax liability or refund eligibility for an individual or company.

Contingent Fees

Fees for services, such as legal representation, that are payable only if a particular outcome is achieved.

IRS

Internal Revenue Service, the U.S. government agency responsible for tax collection and enforcement of tax laws.

Internal Revenue Code

The collection of laws governing federal taxation in the United States, defining tax rates, deductions, credits, and procedures.