Tracy Invested in the Following Stocks and Bonds During 2014

Essay

Tracy invested in the following stocks and bonds during 2014.
Blue, Inc. ^$25,000
City of Falcon bonds ^75,000
To finance the investments, she borrowed $100,000 from Swan Bank. Interest expense paid on the loan during 2014 was $5,000. During 2014, Tracy received $1,250 of dividend income from Blue, Inc. and $3,000 of interest income on the municipal bonds.
a. Determine the amount of Tracy's gross income.
b. Determine the maximum amount of Tracy's deductible interest expense.