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x They may deduct interest on $1,100,000 of the
They mortgage loan.
x If the acquisition debt exceeds $1,000,000, the
If excess up to $100,000 can be deemed home equity
27 Qualified Residence Interest Deductions Example 2
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.
x They may deduct interest on: $700,000 of remaining
They acquisition debt and $100,000 of home equity debt.
28 Qualified Residence Interest Deductions Example 3
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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- Spring '11