Jessica purchased a home on January 1, year 1 for $720,000 by making a down payment of
Question:
Jessica purchased a home on January 1, year 1 for $720,000 by making a down payment of $300,000 and financing the remaining $440,000 with a 30-year loan, secured by the residence, at 6 percent. During year 1 and year 2, Jessica made interest-only payments on this loan of $26,400 (each year). On July 1, year 1, when her home was worth $740,000 Jessica borrowed an additional $185,000 secured by the home at an interest rate of 8 percent. During year 1, she made interest-only payments on the second loan in the amount of $7,400. During year 2, she made interest only on the second loan in the amount of $14,800. What is the maximum amount of the $41,200 interest expense Jessica paid during year 2 may she deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard?
$0
$14,800.
$38,777
$8,400
$41,200.
Taxation Of Individuals And Business Entities 2015
ISBN: 9780077862367
6th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver