Liang pays $12,000 in interest on debt that was used to purchase portfolio investments. He receives $6,000 in interest from certificates of deposit, $4,200 in royalties, and $2,000 in interest on municipal bonds during the year. His invest- ment-related expenses total $700. Liang's adjusted gross income is $75,000.
a. Assuming that Liang has no other qualifying miscellaneous itemized deductions during the year and that none of the debt is used to acquire the municipal bonds, how much of the $12,000 in interest paid can he deduct?
b. What would Liang's deduction be if he also had $1,000 in qualifying miscellaneous itemized deductions (employee business expenses)?
c. Assume that in part b, the qualifying expenses total $2,700.