Brandon and Jane Forte File a Joint Tax Return and Decide

question 7

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 $121,000 in salary, $1,500 interest income, $2,000 nonqualifying dividends, and $2,100 long-term capital gains. The Fortes' expenses for the year consist of $3,525 in investment interest expense and $1,000 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)$1,500.
• C)$3,500.
• D)$3,525.
• E)None of the choices are correct.

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, making them partial owners and entitling them to a portion of the company's profits.

Corporate Bond

A type of debt security issued by a corporation to raise capital, promising to pay back the face value, along with interest, to the bondholders.

Primary Market

The market in which financial institutions aid in the sale of new securities.

New Issues

Refers to securities that are being offered to the public for the first time, such as through an initial public offering (IPO).