View the step-by-step solution to:

Fran, who is in the 35% tax bracket, recently collected $100,000 on a life insurance policy she carried on her father.


Fran, who is in the 35% tax bracket, recently collected $100,000 on a life insurance policy she carried on her father. She currently owes $120,000 on her personal residence and $120,000 on business property. National Bank holds the mortgage on both pieces of property and has agreed to accept $100,000 in complete satisfaction of either mortgage. The interest rate on the mortgage is 8%, and both mortgagees are payable over 10 years. What would be the tax consequences of each of the following alternatives assuming that Fran currently deducts the mortgage interest on her tax return?


a. Retire the mortgage on the residence.
b. Retire the mortgage on the business property.


Which alternative should Fran select?
Sign up to view the entire interaction

Top Answer

Hi Please find... View the full answer

8526685.doc

Solution:
a.
If Fran retires the debt on the residence, she will identify $20,000 as income from
release of indebtedness. She would be needed to pay $7,000 (i.e. $20,000 X 35%) of
additional income...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online