This Year, Mr

question 85

Multiple Choice

This year, Mr. and Mrs. Lebold paid $3,100 investment interest expense. They earned $4,750 investment income consisting of $1,900 interest and $2,850 qualified dividends. Which of the following statements is true?

• A) If the Lebolds elect to treat $1,200 of the qualified dividends as ordinary income not taxed at a preferential rate, they can deduct $3,100 investment interest expense.
• B) The Lebolds can deduct $3,100 investment interest expense only if they elect to treat all of the $2,850 qualified dividends as ordinary income not taxed at a preferential rate.
• C) The Lebolds can deduct $3,100 investment interest expense because their investment income exceeds $3,100.
• D) The Lebolds' deduction for investment interest expense is limited to $1,900.

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Definitions:

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