Marjorie is single and has the following investment income:
Interest on savings ..... $2,900
Municipal bond interest .... 1,500
Dividends .......... 7,600
She pays investment interest expense of $15,000. The interest expense relates to all the assets in her portfolio.
a. What is Marjorie’s allowable deduction for investment interest?
b. Assume that Marjorie’s marginal tax rate is 28%. If she sells stock that produces a long-term capital gain of $3,000, how will the sale of stock affect her investment interest deduction?