Exempt income expenses

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  • KWF
    Member
    • Dec 2007
    • 63

    #1

    Exempt income expenses

    A taxpayer incurs $150 expense specifically to produce $10,000 investment income, $5000 of which is taxable & $5000 which is tax exempt.

    He also earns another $5000 investment income, all taxable, which is a separate investment and does not have any expense associated with it.

    Is his deductible expense $75, or $100?
  • taxea
    Senior Member
    • Nov 2005
    • 4292

    #2
    it is possible that the expense should be added to his basis.
    Believe nothing you have not personally researched and verified.

    Comment

    • Roland Slugg
      Senior Member
      • Aug 2006
      • 1860

      #3
      Since the expense can be specifically identified with one account, that is the allocation method to use. Deduction = $75. See Regs 1.265-1(c)
      Roland Slugg
      "I do what I can."

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