OUTLINE_6_Real_Estate_Student_Outline

OUTLINE_6_Real_Estate_Student_Outline - OUTLINE 6 Rental...

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OUTLINE 6 Rental property/Home office March 25, 2011 OUTLINE 6 Chapter 10: Interest expense (Section 10.4): See end of outline for additional reading on residence interest expense Chapter 10: Taxes (Section 10.3 you can omit apportionment of real property taxes, Section 10.12) Chapter 6 (Pages 20-25 Rental of Vacation Homes) Chapter 9: Section 9.8 pages 9-23 to 9-25 Office in the home: NOLO press Chapter 7: Office Expenses pages 156-188 I. Categories of Interest Expense a. Chapter 10: Interest expense (Section 10.4): Problems: 33 b. See end of outline for additional reading on residence interest expense b.i. Business interest expense b.i.1. Deductible on Schedule C b.ii. Investment interest expense b.ii.1. Deductible on Schedule A b.ii.1.a. Miscellaneous itemized deduction (2 percent floor) b.ii.2. Deduction is limited to net investment income b.iii. Interest expense related to tax-exempt securities is not deductible b.iv. Employee interest expense—not deductible b.v. Personal interest expense b.v.1. Consumer interest expense—no deductible b.v.2. Qualified student loans b.v.2.a. Maximum $2500 b.v.2.b. Phased out b.vi. Qualified residence interest expense
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Acquisition debt up to $1 million b.vi.2. Home equity loan up to $100,000 c. QUESTION: c.i. Is the following interest expense deductible and if so on which form? c.ii. Are there any limits on the amount deducted? c.ii.1. Interest incurred on refinancing A’s home if the funds are used for a vacation. c.ii.2. Interest incurred to purchase bonds as an investment. c.ii.3. Interest incurred to purchase State of New York bonds c.ii.4. Interest incurred on an ordinary bank loan if the funds are used to provide medical care for a dependent of A. II. Qualified Residence Interest Expense a. Chapter 10: Interest expense (Section 10.4) b. EXAMPLE: During 2008 Tom purchases a principal residence in Boston for $900,000 and a vacation home in Tampa for $500,000. Mortgages secured by both properties total $1.3 million. What is the principal balance of the loan on which interest can be deducted? a.i. ANSWER : a.i.1. Qualified residence interest a.i.1.a. Acquisition debt 1,000,000 a.i.1.b. Home Equity Loan 100,000 a.i.1.c. Qualified Residence Interest 1,100,000 b. QUESTION b.i. Rob purchased his present house in 1995 for $250,000 and borrowed $210,000 at 9%. In 2008 the remaining balance of his mortgage was $190,000. He refinanced the balance of his mortgage, $190,000, by securing a new mortgage of $430,000 at 5% when the house was worth $550,000. He used the excess money ($240,000) to purchase a sailboat (not used as a personal residence) for his pleasure. What is the principal balance of the loan on which interest can be deducted? b.i.1.
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This note was uploaded on 11/07/2011 for the course ACCT 508 taught by Professor Frankel during the Spring '10 term at S.F. State.

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OUTLINE_6_Real_Estate_Student_Outline - OUTLINE 6 Rental...

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