Kerri, a single taxpayer who itemizes deductions on Schedule A, incurs $15,000 of interest expense on funds borrowed to acquire taxable bonds. Kerri also has $20,000 of taxable interst income for the year. Answer the following questions:

a. How much of the interest expense can she deduct?

b. Assuming the same facts except that the $20,000 of investment income is a qualified dividend rather than taxable interest income, and she did not elect to include dividends in investment income, how much of the interest expense can she deduct?

c. Assuming the same facts except that the $20,000 of investment income is a qualified dividend rather than taxable interest income, and she elects to include dividends in investment income, how much of the interest expense can she deduct?

d. Compare the choices of b and c; please help Kerri determine which tax option is better choice for tax for saving. Assume Kerri is in a 25% marginal tax bracket.