Dan and Sue Hill File a Joint Tax Return and Elect

question 22

Essay

Dan and Sue Hill file a joint tax return and elect to itemize their deductions.For 20X7,the Hills received the following income items: (1)$150,000 salary,(2)$3,000 long-term capital gain,and (3)$1,500 interest income.Other than these amounts,no other events or transactions affected their AGI in 20X7.During the same year,the Hills incurred the following expenses: (1)$500 tax preparation fees,(2)$4,000 investment expenses,and (3)$10,000 additional miscellaneous expenses.Assuming the Hills have a marginal tax rate of 30 percent,what is the tax benefit they receive from the investment expenses they paid?

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Definitions:

Nominal Interest Rate

The percentage increase in money that borrowers pay lenders, not adjusted for inflation.

Inflation

The pace at which prices for various goods and services climb, diminishing the value of money to buy them.

Storage Costs

Expenses associated with keeping goods stored in a warehouse or other facility until they are sold or used.

Interest Rate

The interest rate a borrower incurs for the money lent to them by a lender.