A taxpayer has $25,000 in investment expenses (not interest) connected to a large portfolio of real estate assets held for producing taxable income. What amount of this is included as a deduction in his return and how? (Choose the answer that fits the best)

Select one:

a. The taxpayer just adds these expenses to the cost basis of the assets for future disposition and reporting.

b. The taxpayer will deduct these expenses as a capital loss on the Schedule D for both the federal and the state return.

c. The taxpayer will itemize these expenses on both the federal and state return as miscellaneous line 16 deductions.

d. The taxpayer will itemize these on the state return as a miscellaneous deduction, but will otherwise leave them off of the federal return in a direct fashion, where most of these costs will just add to the adjusted basis of the assets.