Exercise $10-19($Algorithmic$)($LO$.5)$

Miller owns a personal residence with a fair market value of $$308,000$ and an outstanding first mortgage of $$246,400,$ which was used

entirely to acquire the residence. This year, Miller gets a home equity loan of $$15,400$ to purchase a new fishing boat for personal use.

How much of this mortgage debt is treated as qualified residence indebtedness?

$x$

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The Supreme Court has defined interest as compensation for the use or forbearance of money. The general rule permits a deduction for interest

paid or accrued within the taxable year on indebtedness. Qualified residence interest falls into two categories: $(1)$ interest on acquisition

indebtedness and $(2)$ interest on home equity loans.