Javier and AnitaSanchez purchased a home on January 1 of year 1 for $1,000,000 by paying $200,000
Question:
Javier and AnitaSanchez purchased a home on January 1 of year 1 for $1,000,000 by paying $200,000 down and borrowing the remaining $800,000 with a 6 percent loan secured by the home.The Sanchezes made interest only payments on the loan in years 1 and 2.
a.Assuming year 1 is 2017, how much interest would the Sanchez’s deduct in year 2?
b.Assuming year 1 is 2018, how much interest would the Sanchez’s deduct in year 2?
c.Assume year 1 is 2018 and by the beginning of year 4, the Sanchezes have paid down the principal amount of the loan to $500,000. They borrow $100,000 using a loan secured by the home in order to finish their basement. The new loan carries a 7 percent interest rate. What amount of interest can the Sanchezes deduct on the $100,000 loan?
d. Assume year 1 is 2018 and by the beginning of year 4, the Sanchezes have paid down the principal amount of the loan to $500,000. They borrow $100,000 using a loan secured by the home in order to finish purchase a new car. The new loan carries a 7 percent interest rate. What amount of interest can the Sanchezes deduct on the $100,000 loan?
Step by Step Answer:
Taxation Of Individuals And Business Entities 2019 Edition
ISBN: 9781259918391
10th Edition
Authors: Brian C. Spilker, Benjamin C. Ayers, John Robinson, Edmund Outslay, Ronald G. Worsham, John A. Barrick, Connie Weaver