MGMT 127A Lecture Notes - Lecture 12: Pension, Traditional Ira, Nasdaq
Document Summary
Investment interest expense is deductible to the extent of net investment income. Net investment income= investment income - investment expenses (not including investment interest expense) Interest income: annuities, royalties, dividend income if the taxpayer elects to forego the 0%, 15%, 20% tax rate. This is a good idea if the only income you are making is dividend income: stcg, ltcg if the taxpayer elects to forego the 0%, 15%, 20% tax rate. Income derived in the ordinary course of business. Income from a real estate activity in which a taxpayer actively participates. Note that if funds are borrowed to buy municipal bonds, the interest expense is not deductible. Example: you have 100k and take a loan for 100k so now you have 200k invested in a stock. If your stock becomes worth 300k and you sell it--> you pay back the 100k loan, have 100k in recovery of capital, and have a 100k gain.
