Question from Economics of public revenue Miss P has 1,000,000 baht in her bank account. Miss...

Question from Economics of public revenue

Miss P has 1,000,000 baht in her bank account. Miss P has 2 options for spending her money.

1. Buy a mutual fund and get 5 percent a year in return,
or
2. Buy a house worth 1,000,000 baht.

If Miss P borrows money to buy her house, she has to pay 7 percent in interest per year. She can deduct interest paid for her home loan from her personal income tax base. Miss P's marginal tax rate is 40 percent. Can Miss P get any benefits from tax arbitrage? How?

Expert Solution

Yes, Miss P can get benefits from the tax arbitrage through mortgage interest deduction which is a common itemized deduction that allows homeowners to deduct the interest they pay on any loan used to build, purchase, or make improvements upon their residence, from taxable income. The mortgage interest deduction can also be taken on loans for second homes and vacation residences with certain limitations. This deduction is offered as an incentive for homeowners as it lowers the amount of tax owed.

Many times, homeowners can deduct the whole of their mortgage interest paid as long as they meet all requirements. The amount allowed for the deduction is reliant upon the date of the mortgage, the amount of the mortgage and how the proceeds of that mortgage are used. As long as the homeowners's mortgage matches the following criteria throughout the year, all mortgage interest can be deducted by reporting on Schedule A of the 1040 tax form.

Rahul Sunny answered 2 years ago

question If Susan Kalanti deposits $35,000 into her saving account at her Bank of America branch...

question If Susan Kalanti deposits $35,000 into her saving account at her Bank of America branch in Houston, TX, and you know that Bank of America can only loan 84% of that amount, then, because of this transaction, the money supply is US economy Question 7 options: increases by $21,8750 increases by $29,400 increases by $2,940,000 decreases by $29,400 Question 8 An economy experiences an economic "expansion" as long as Question 8 options: real GDP is continually increasing and there...

In a bank reconciliation, interest revenue earned on a chequing account would be deducted from the...

In a bank reconciliation, interest revenue earned on a chequing account would be deducted from the book balance. true or false

Toby invested $30,000 from her retirement account, borrowed $20,000 from the bank and opened her landscaping...

Toby invested $30,000 from her retirement account, borrowed $20,000 from the bank and opened her landscaping business by buying $10,000 in equipment (expected to last 10 years) and $5,000 in inventory (lime, sod, stones, loam, etc.). Set up the balance sheet in excel format for this point in the formation. During the year, Toby made $100,000 in sales (30% for cash) and collected $60,000 in AR. She paid $20,000 in wages for a part time employee, sold $3,000 of inventory...

Business Law question: Sarah draws a check on her account at Bank of America, payable to...

Business Law question: Sarah draws a check on her account at Bank of America, payable to Trees R US. a. She postdates the check by 15 days. Does this affect the negotiability? Explain. b . Identify the drawer, the drawee and payee.

Edith is college student; she has $5,000 in her bank account at Mesa Verde Bank. One...

Edith is college student; she has $5,000 in her bank account at Mesa Verde Bank. One day, she writes a check for $1,000 to pay for books, and she deposits $2,000. You need to show your calculation when needed and justify your answers. Answering with just a figure will earn only half the credit. a. What is the initial available balance on her bank account? b. Calculate her book value after she wrote the check. c. Calculate her disbursement float....

Laura has a $100,000 balance in her checking account at Best Bank, and she has purchased...

Laura has a $100,000 balance in her checking account at Best Bank, and she has purchased a certificate of deposit (CD) worth $50,000 issued by Best Bank. Laura is also thinking of investing $200,000 either in Best Bank or in Trust Bank. Which of the following is a suitable strategy for Laura if she wants her deposits to be completely insured? a. Laura should invest $150,000 in a money market deposit account (MMDA) of Best Bank and invest $200,000 in...

Question 2 Bank Reconciliation The Duluth Manufacturing Company has a business chequing account at the Bank...

Question 2 Bank Reconciliation The Duluth Manufacturing Company has a business chequing account at the Bank of Ontario. The bank provides a bank statement and cancelled cheques once a month. The cut-off date is the last day of the month. The bank statement for the month of May is summarized as follows: Balance, May 1, 2016 $32,120 Deposits 82,140 Cheques processed (78,433) Service charges (80) NSF cheque from customer (2,187) Note...

Erica has her savings in a bank account that pays 4.0% interest per year. She is...

Erica has her savings in a bank account that pays 4.0% interest per year. She is considering buying stock in a pharmaceuticals company that is developing a cure for cellulite. Her research indicates that she could earn 45% in one year if the cure is successful or lose 65% in one year if it is not. At what probability of success would the pharmaceuticals stock be the better choice? (Round your answer to two decimal places.)

Stacy deposits $1,000 in her checking account. The bank ends up loaning $400 from the $1,000...

Stacy deposits $1,000 in her checking account. The bank ends up loaning $400 from the $1,000 to another customer, and placing $600 in the bank’s vault. Thus, as a result of Stacey’s deposit and the bank’s actions, the money supply has Select one: a. Increased by $400. b. Declined by $200. c. Increased by $200. d. Declined by $400. Anna deposits $300 in her checking account, and her bank loans the $300 out to Jim the next day. Who is...

Daneen has borrowed $6000 from her bank to buy a new machine for her business. She...

Daneen has borrowed $6000 from her bank to buy a new machine for her business. She has promised to make payments of $2000 after two years, $2500 after three years, and a final payment after five years. What is the size of the last payment, if interest is 8% compounded semiannually? show caculation by BAII plus CAlculator.You are encouraged to draw the timelines for yourself to help you with setting up the logic of how to solve the problem.

Question