Helen borrowed $100,000 to acquire a parcel of land to be held for investment purposes. During 2012, she paid interest of $11,000 on the loan. She had AGI of $75,000 for the year. Other items related to Helen’s investments include the following:
|
Investment income |
$10,000 |
|
Long term capital gain on sale of stock |
7,500 |
|
Investment counsel fees |
2,000 |
Helen is unmarried and elects to itemize her deductions. She has no miscellaneous itemized deductions other than the investment counsel fees.
a. Determine Helen’s investment interest deduction for 2012.
b. Discuss the treatment of the portion of Helen’s investment interest that is disallowed in 2012.