In the current year, Thaddeus has investment interest expense of 4,000; net investment income of 3,600; AGI 225,000. What amount of investment interest expense may be deducted in the current year?

In the current year, Thaddeus has investment interest expense of 4,000; net investment income of 3,600; AGI 225,000. What amount of investment interest expense may be deducted in the current year?

• A. 3,600
• B. 5,000
• C. 0
• D. 4,000

Answer: (A)

Investment interest expense is deductible only to the extent of net investment income. If the interest expense exceeds net investment income, the excess isn’t deductible this year and can be carried forward to future years. Here, investment interest expense is 4,000 but net investment income is 3,600. The deductible amount for the current year is the lesser of the two, 3,600. The remaining 400 can be carried forward to offset future net investment income. AGI isn't used to determine this particular deduction.

Investment interest expense is deductible only to the extent of net investment income. If the interest expense exceeds net investment income, the excess isn’t deductible this year and can be carried forward to future years.

Here, investment interest expense is 4,000 but net investment income is 3,600. The deductible amount for the current year is the lesser of the two, 3,600. The remaining 400 can be carried forward to offset future net investment income. AGI isn't used to determine this particular deduction.