Helen borrowed $150,000 to acquire a parcel of land to be held for investment pu

Question

Helen borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During 2015, she paid interest of $12,000 on the loan. She had AGI of $90,000 for the year. Other items related to Helen's investments include the following: Investment income $11,000 Long-term capital gain on sale of stock 3,500 Investment counsel fees 200 Helen is unmarried, does not itemize her deductions and does not elect to treat the capital gain as investment income.

a. Helen's net investment income is $10,800.

Helen's investment interest expense deduction in 2015 is $10,800.

The investment interest disallowed in 2015 is $1,200.

b. Indicate whether the following statements are true or false regarding the treatment of the portion of Helen's investment interest that is disallowed in 2015.

The investment interest disallowed is carried over and becomes investment interest expense in the subsequent year. True or False

The investment interest disallowed is lost and not subject to any carryover. True or False

The investment interest disallowed is carried over and may be used to offset any type of income in the subsequent year. True or False

Explanation / Answer

The investment interest disallowed is carried over and becomes investment interest expense in the subsequent year. True or False Ans) True The investment interest disallowed is lost and not subject to any carryover. True or False Ans) False We can carryover to next year The investment interest disallowed is carried over and may be used to offset any type of income in the subsequent year. Ans) Flase not allowed to setoff other income in subsequent year

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