What is Carol's investment interest expense deduction if her interest expense was $11,000?

To determine Carol's investment interest expense deduction, it is important to understand the rules governing this type of deduction under the Internal Revenue Code. An individual can deduct investment interest expenses up to the amount of net investment income they report on their tax return.

In the context of the question, if Carol’s investment interest expense is $11,000, the deductible limit is the lesser of the actual interest expense or her net investment income. If Carol's net investment income is, for example, only $5,000, she can only deduct this lower amount, which would account for the deduction limit.

Since you identified $5,000 as the answer, it suggests an scenario where Carol's net investment income is less than her total interest expense, leading to the maximum allowable deduction being set at the net investment income, which in this case is $5,000. This aligns with tax code limitations regarding deductible investment interest.

Thus, Carol’s investment interest expense deduction is correctly identified as $5,000 in this scenario.