Itemdize deduction for the amount of the investment


Ahmad is considering making a 10,000 investment in a venture which its promoter promises will generate immediate tax benfits for him. Amhad, who normally itemizes his deductions, is in the 28% marginal tax bracket. If the investment is of a type where the taxpayer may claim either a tax credit 25% of the amount of the expenditure or an itemdize deduction for the amount of the investment, what treatment normally would be most beneficial to Ahmad and by how much will Amhad's tax liablity decline because of the investment?

A. 0, take neither the itemized deduction nor the tax credit

B. 2,500, take the take credit

C. 2,800, take itemized deduction

D. Both options produce the same benefit

E. None of the above

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Accounting Basics: Itemdize deduction for the amount of the investment
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