Question

In: Accounting

Mary’s AGI for the year is $30,000. She paid the following amounts during the current year:...

Mary’s AGI for the year is $30,000. She paid the following amounts during the current year:

Amount         Purpose

$2,500             Interest on $100,000 mortgage to acquire personal residence

     550           Points paid to obtain the mortgage

     850             Interest on auto loan (auto is used 100% for personal purposes)

Mary’s current year interest itemized deduction after any applicable floor is:

a.   $3,900.

b.   $3,350.

c.   $3,050.

d.   $2,500.

e.   none of the above.

2.   Jon’s AGI for the year is $40,000. He paid the following amounts during the current year:

Amount            Purpose

   $150                Interest on business-related loan

     325                Finance charges paid on credit cards

     550                Interest on loan used to purchase municipal bonds

Jon’s current year interest itemized deduction after any applicable floor is:

a.   $0.

b.   $150.

c.   $550.

d.   $1,025.

e.   none of the above.

3.   Devon’s AGI for the year is $50,000. Devon paid the following amounts during the current year:

Amount              Purpose

$3,750                 Interest on $150,000 mortgage to acquire rental property

1,000                Interest on $35,000 home equity loan

1,750                 Interest on Devon’s sister's home mortgage. His sister was laid off from her job and was unable to make her home mortgage payments. Devon is not an official co-signer on the loan.

Devon’s current year interest itemized deduction after any applicable floor is:

a.   $6,500.

b.   $2,750.

c.   $1,000.

d.   $0.

e.   none of the above.

4.   In 2019, Shasta paid monthly escrow payments totaling $3,600 (i.e., $300 per month) to her mortgage company to cover her real estate taxes for the year. The mortgage company used the funds in Shasta’s escrow account to pay her real estate tax bill of $3,400 on October 1, 2019. Shasta’s AGI is $40,000. Her itemized deduction for taxes after any applicable floor is:

      a.   $3,600.

      b.   $3.400.

      c.   $2,700.

      d.   $0.

      e.   none of the above.

Solutions

Expert Solution

1. Ans. C

Interest on auto loan can not be itemized as auto was used for personal use.

2. D

All three amounts can be itemized.

3. B

Interest on mortgage to acquire rental property can't be itemized.

4. B

Only 3400 will be deducted as it was her real estate tax bill.

ekkarill92 answered 2 years ago
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