Matthew borrows $250,000 to invest in bonds. During 2013, his interest on the loan is $30,000. Matthew\'s interest income from the bonds is $10,000. This is Matthew\'s only investment income. A. Calculate Matthew\'s itemized deduction for investment interest expense for this year? B. Is Matthew entitled to a deduction in future years? Explain your answer. Solution A. Calculate Matthew\'s itemized deduction for investment interest expense for this year? Deductable amount = $10,000 Income - $30,000 Expenses = -$20,000 Deduction for current year: $13000. You are allowed to deduct the amount of income and up to $3000 of a loss for the year. B. Is Matthew entitled to a deduction in future years? Explain your answer. Yes, $17,000 can be carried forward and offset against future interest income or a loss of $3000. .

1. Matthew borrows $250,000 to invest in bonds. During 2013, his interest on the loan is $30,000.
Matthew's interest income from the bonds is $10,000. This is Matthew's only investment
income.
A. Calculate Matthew's itemized deduction for investment interest expense for this year?
B. Is Matthew entitled to a deduction in future years? Explain your answer.
Solution
A. Calculate Matthew's itemized deduction for investment interest expense for this year?
Deductable amount = $10,000 Income - $30,000 Expenses = -$20,000
Deduction for current year: $13000. You are allowed to deduct the amount of income and up to
$3000 of a loss for the year.
B. Is Matthew entitled to a deduction in future years? Explain your answer.
Yes, $17,000 can be carried forward and offset against future interest income or a loss of $3000.