Assume that, having reduced the mortgage balance to $200,000, Maggie refinanced the summer home to secure a lower interest rate and to take advantage of the significant equity she had in the home as a result of an increase in property values. As part of the refinancing, Maggie borrowed an additional $500,000 from the bank, thus increasing her mortgage to $450,000. Maggie used the refinancing proceeds as follows: $100,000 to remodel the summer home; $150,000 to purchase a tract of land she will hold for investment; and $50,000 to pay for a vacation to the Bahamas for her family. In view of these facts, what basis will Maggie have in the summer home? What basis will Maggie have in the tract of land she purchased for investment?

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Maggies basis in the summer home and the tract of land she purchased for investment can be calculate... View the full answer