Question

This year Randy paid $28,000 of interest. (Randy borrowed $450,000 to buy his residence, which is currently worth $500,000.) Randy also paid $2,500 of interest on his car loan and $4,200 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deduction under the following circumstances?
a. Randy received $2,200 of interest this year and no other investment income or expenses. His AGI is $75,000.
Interest Deductible $.......

b. Randy had no investment income this year, and his AGI is $75,000.
Interest Deducttible $.......

Answer 1

Answer:

A.- Randy can deduct $30,200  The interest on the loan of the car is nondeductible personal interest, but he can deduct all $28,000 on the home loan as an itemized deduction.   The $4,200 of margin interests is likely investment interest, and this itemized deduction is limited oto net investment income. $2,200 of interest income qualifies as investment income and he apparently has no other invesstment expenses, the investment interest expense would be limited to Randy´s $2,200 in net investment.

B. He may deduct all %28,000 of his interest on the home loan