For the Current Tax Year, David, a Married Taxpayer Filing

question 65

Multiple Choice

For the current tax year, David, a married taxpayer filing a joint return, reported the following: $\begin{array}{llcc} \text { Investment income from interest} &\$24,000\\ \text { Investment expenses other than interest} &\$3,000\\ \text {Interest expense on funds borrowed 10 years ago to purchase investment } &\\ \text {property } &\$70,000\\\end{array}$
What is the maximum amount that David can deduct in the current year as investment interest expense?

• A)$7,000
• B)$20,000
• C)$21,000
• D)$24,000
• E)None of these

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Definitions:

Simple Interest

Interest calculated only on the principal amount, or the original sum of money borrowed or invested, without considering the effect of compounding over time.

Obligations

Duties or commitments that require an individual or organization to act in a certain manner, often legally binding.

Equivalent Replacement

The act or process of replacing an asset with another that performs the same function or yields the same output.

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.