The they mortgage loan note note x if the acquisition

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Unformatted text preview: ence x They may deduct interest on $1,100,000 of the They mortgage loan. NOTE NOTE x If the acquisition debt exceeds $1,000,000, the If excess up to $100,000 can be deemed home equity debt. debt. 27 Qualified Residence Interest Deductions Example 2 Example x John & Marcia make a $300,000 down payment and John take out a $1,200,000 mortgage to purchase a residence worth $1,500,000. Several years later, John & Marcia’s home is now worth $1.7 million and their acquisition debt remaining is $700,000. They borrow $500,000 to purchase a large sailboat (w/o living accommodations), and use their residence to secure this note. residence x They may deduct interest on: $700,000 of remaining They acquisition debt and $100,000 of home equity debt. acquisition 28 Qualified Residence Interest Deductions Example 3 Example x Sam & Donna bought a house years ago for $125,000 by Sam paying $10,000 cash and signing a mortgage note for $115,000. The home is currently worth $400,000 and the acquisition debt has been reduced to $20,000. Instead of obtaining a second mortgage, they refinance the home with a new mortgage of $280,000 ($20,0...
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