Question

9,

Dawn (single) purchased her home on July 1, 2008. On July 1, 2018, Dawn moved out of the home. She rented out the home until July 1, 2019, when she sold the home and realized a $230,000 gain (assume none of the gain was attributable to depreciation). What amount of the gain is Dawn allowed to exclude from her 2019 gross income?

Multiple Choice

• $0.

• $23,000.

• $207,000.

• $230,000.

13,

Harvey rents his second home. During the year, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income for the year?

Multiple Choice

• $35,000.

• $25,000.

• $5,000.

• $0.

14,

Patrick purchased a home on January 1, 2019, for $600,000 by making a down payment of $100,000 and financing the remaining $500,000 with a 30-year loan, secured by the residence, at 6 percent. During 2019, Patrick made interest-only payments on the loan of $30,000. On July 1, 2019, when his home was worth $600,000, Patrick borrowed an additional $75,000 secured by the home at an interest rate of 8 percent. He used the $75,000 loan proceeds to purchase a new car. During 2019, he made interest-only payments on this loan in the amount of $3,000. What amount of the $33,000 interest expense that Patrick paid during 2019 may he deduct as an itemized deduction?

Multiple Choice

• $0.

• $3,000.

• $30,000.

• $33,000.

20,

Amanda purchased a home for $1,000,000 in 2016. She paid $200,000 cash and borrowed the remaining $800,000. This is Amanda's only residence. Assume that in year 2022, when the home had appreciated to $1,500,000 and the remaining mortgage was $600,000, interest rates declined and Amanda refinanced her home. She borrowed $1,000,000 at the time of the refinancing, paid off the first mortgage, and used the remainder for purposes unrelated to the home. What is her total amount of acquisition indebtedness for the purposes of determining the deduction for home mortgage interest? (Assume not married filing separately.)

Multiple Choice

• $600,000.

• $750,000.

• $1,000,000.

• $1,100,000.

Answer 1

Question - (9)

Answer -

Particulars	Explanation
Option - (D) $230000, is Correct.	Dawn meets the ownership and use tests even though she did not live in the home at the time of the sale so she qualifies for the full exclusion.

.

Question - (13)

Answer -

Particulars	Explanation
Option - (B) $25000, is Correct.	The maximum rental deduction for less than $100000 AGI is $25000.

.

Question - (14)

Answer -

Particulars	Explanation
Option - (C) $30000, is Correct.	$30000 interest expense that Patrick paid during 2019 is deductible.

.

Question - (20)

Answer -

Particulars	Explanation
Option - (A) $600000, is Correct.	Total acquisition indebtedness includes personal residence debt related to the home either directly or if a home equity loan was taken out the money must have been used for the home. In Amanda's case she used the equity at the time of her refinancing for purposes unrelated to the home so that portion is not included in the deduction for home mortgage interest.