Question

Helen Derby borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During the current year, she reported AGI of $90,000 and paid interest of $12,000 on the loan. Other items related to Helen's investments include the following:

Investment and annuity income $11,000 Long-term capital gain on sale of stock 3,500 Real estate tax on the investment land 800

Helen is unmarried, does not itemize her deductions and does not elect to treat the capital gain as investment income. Helen did not have a disallowed investment interest expense amount from the prior year.

a.   Helen's net investment income is $. Helen's investment interest expense deduction in the current year is
$.

Answer 1

ANSWER

Details that are given in the question

Borrowed amount = $150,000
AGI reported = $90,000
Interest paid on loan = $12,000
Investment and annuity income = $11,000
Long-term capital gain on sale of stock = $3,500
Real estate tax on the investment land = $800

Calculating Helen’s NET INVESTMENT INCOME

PARTICULAR	AMOUNT IN ($)
Investment and annuity income	11,000
Less:( Real estate tax on the investment land )	(800)
Helen’s NET INVESTMENT INCOME	10,200

Helen’s Net Investment Income is = $10,200

Therefore , Helen's investment interest expense deduction in the current year is also $10,200 only as the deduction bound to happen is capped at the amount of her current years net investment income which amounts to be $10,200

The Balance which comes out after subtracting the interest paid on loan ($12,000) with the current net investment income of ($10,200)

$12,000 - $10,200 = $1,800

This amount of $1,800 is not reported and is disallowed for the current year time period and which is now have to be carry forward to the next year or coming years.