Tom owns two houses. He lives in one of them on a full-time basis. The other one he uses 30 days of the year and rents it to strangers for 10 days a year. There is an original mortgage amount on his principal residence of $200,000, on which he paid $20,000 in interest this year. His second home has an original mortgage amount of $100,000, on which he paid $10,000 in interest this year.
a. How much of the interest is deductible?
b. What if Tom uses the second house only 14 days a year and he never rents the house out?
c. What if the original mortgage was acquired in 1984 and was for a total purchase price of $2,000,000? Assume for this question that the current balance on the mortgage is $1,500,000. Also assume there is no second home.