What is Yukiko's maximum allowable investment interest expense deduction for the current year?

To determine Yukiko's maximum allowable investment interest expense deduction, it's important to understand the rules surrounding such deductions. The maximum deduction for investment interest expense is limited to the taxpayer's net investment income for the year. This means that if Yukiko has a specific amount of net investment income, her investment interest expense deduction cannot exceed that income, regardless of how much interest she paid.

In this case, if the correct answer is $3,500, this implies that Yukiko's net investment income is likely around that amount, allowing her to deduct that entire figure. This highlights the importance of accurately calculating net investment income, which includes interest, dividends, and capital gains, as these are critical to knowing how much of the investment interest expense she can deduct.

The other options reflect either higher potential deductions than her net investment income permits or do not match the calculated limit based on her actual investment income for the year. Therefore, the choice of $3,500 as her maximum allowable deduction is appropriate based on the limitation set forth by her net investment income.