Computation of Taxable Income. During 2013, 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 taxes paid 7,000
State sales tax paid 4,500
Property taxes 4,000
Tax 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 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)?