Walter, who is single, owns a personal residence in the city. He also owns a cab
ID: 2457102 • Letter: W
Question
Walter, who is single, owns a personal residence in the city. He also owns a cabin near a ski resort in the mountains. He uses the cabin as a vacation home. In August, Walter borrowed $60,000 on a home equity loan and used the proceeds to reduce credit card obligations and other debt. This year, he paid the following amounts of interest.
Determine the amount of interest that is deductible for regular income tax and AMT purposes.
If an amount is zero, enter "0".
Walter has a ( Select; positive or negative) AMT adjustment of ?
Interest on his personal residence $16,000 Interest on the cabin 7,000 Interest on the home equity loan 2,500 Interest on credit card obligations 1,500 Interest on the purchase of personal-use SUV 1,350Explanation / Answer
For the regular tax, individual taxpayers can deduct interest on a mortgage loan that the taxpayer used to purchase a qualified residence (i.e., the taxpayer’s principal residence and one other residence selected by the taxpayer that the taxpayer uses as a personal residence) or refinance an existing loan that was used to purchase a qualified residence, to the extent the refinancing loan does not exceed the original mortgage loan. The taxpayer may also deduct interest on a home equity loan or line of credit. For the AMT, an individual may only deduct interest on a mortgage loan used in acquiring, constructing, or substantially improving a principal residence or qualified dwelling.
2500 would be added back for AMT adjustment
Regular Income tax AMT Purposes Personal residence 16,000 16,000 Cabin - - Home equity loan 2,500 - Credit card obligations - - SUV - - Total 18,500 16,000Related Questions
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