Brandon and Jane Forte File a Joint Tax Return and Decide

question 28

Multiple Choice

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Forte's income for the year consists of $120,000 in salary, $1,000 interest income, $1,500 nonqualifying dividends, and $1,000 long-term capital gains. The Forte's expenses for the year consist of $3,000 investment interest expense and $900 tax preparation fees. Assuming that the Forte's marginal tax rate is 30% and they make no special elections, what is the amount of investment interest expense deduction for the year?

• A)Zero; investment interest expense is below two percent of AGI
• B)$1,000
• C)$2,500
• D)$3,000
• E)None of these

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Definitions:

Journal Entries

Records of financial transactions in accounting, indicating the accounts affected, amounts, and descriptions of transactions.

Treasury Stock

Shares that were issued and subsequently reacquired by the company, reducing the amount of outstanding stock on the market.

Common Stock

An equity security that represents ownership in a corporation, giving shareholders the right to vote on corporate matters and receive dividends.

Stock Transfer Agent

A third-party firm hired by a company to track and manage its stockholders and transactions, including transfers and issuance of stock certificates.