Emeril borrows $340,000 to finance taxable and tax-exempt investments. He incurs $18,000 investment interest expense, allocated equally between the taxable and tax-exempt investments. Ignore any possible investment interest expense limitation. How much of the interest expense is deductible, and where is it deductible?
A) $18,000 for AGI
B) $18,000 from AGI
C) $9,000 for AGI
D) $9,000 from AGI
D) $9,000 from AGI
Interest incurred to acquire tax-exempt investments is not deductible. Deductible investment interest expense is not enumerated in Sec. 62 as a "for AGI" deduction so it is a "from AGI" deduction.
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