LO.9 In 2010, Rachel Tweardy incurs $25,000 of interest expense related to her investments. Her investment income includes $9,000 of interest, $5,000 of qualified dividends, and an $8,000 net capital gain on the sale of securities. Rachel asks you to compute the amount of her deduction for investment interest, taking into consideration any options she might have. In addition, she wants your suggestions as to any tax planning alternatives that are available. Write a letter to her that contains your advice.

Rachel lives at 11934 Briarpatch Drive, Midlothian, VA 23113.