Tracy invested in the following stocks and bonds during 2017.

Blue, Inc. $25,000

City of Falcon Bonds $75,000

To finance the investments she borrowed $100,000 from Swan Bank. Interest expense paid on the loan during 2017 was $5,000. During 2017, Tracy received $1,250 of dividend income from Blue, Inc. and $3,000 of interest income on the municipal bonds.

a. Determine the amount of Tracy's gross income.

b. Determine the maximum amount of Tracy's deductible interest expense.