During 2015, James, a single, cash method taxpayer incurred the following expenditures:
Qualified medical expenses ……………………………………. $ 8,000
Investment interest expense ……………………………………. 16,000
Other investment activity expenses ……………………………. 15,000
Qualified residence interest ……………………………………. 12,000
Interest on loan on personal auto ………………………………. 2,000
Charitable contributions ……………………………………….. 3,000
State income tax paid ………………………………………….. 7,000
State sales tax paid …………………………………………….. 4,500
Property taxes …………………………………………………. 4,000
Tax return preparation and consulting fees …………………… 5,000
James’ income consisted of the following items:
Salary …………………………………………………………. $70,000
Interest income ……………………………………………….. 20,000
Long-term capital gains ………………………………………. 23,000
Long-term capital losses ……………………………………… (15,000)
a. Compute James’ taxable income for the year (assuming that he makes an election to have the net capital gain taxed at the regular tax rates). Also assume that James is 67 years old. Thus, his medical expense deduction is subject to the 7.5% rather than the 10% limit.
b. What is James’ investment interest carryover (if any)?