Mr. Tolen made the following interest payments. Determine the extent to which he

Question

Mr. Tolen made the following interest payments. Determine the extent to which he can deduct each payment on his Form 1040.

A. $4,600 on credit card debt.

B. $14,100 on a $210,000 mortgage secured by his vacation home in Key West. Mr. Tolen incurred the mortgage to purchase this second home.

C. $1,300 on a $22,000 unsecured loan from a credit union. Mr. Tolen used the loan proceeds to add a boat dock to his Key West home.

D. $2,400 on a $50,000 loan from a bank. Mr. Tolen used the loan proceeds to purchase an interest in Farlee Limited Partnership, which is his only investment asset. This year, Mr. Tolen was allocated a $790 ordinary loss from the partnership.

E. $800 in a $35,000 loan from a car dealership that financed the purchase of Mr. Tolen’s new family automobile.

Explanation / Answer

following types of interest not deductable under form 1040 :

hence Interest paid on credit card debt $4600 and $800 for car purchased not deductable.

Investment interest deductable as itemized deduction on form 1040 but limited to to his investment income in the given case there are loss from partnership hence such interest not deductable.

$14100 paid for Mortagage to purchase second home is deductable under itemized deduction

$ 1300 interest paid to add boat duck on his second home also deductable under itemized deduction

Total Interest Mr. Tolen Can Calim on his form 1040 is $ 14100+$1300 = $15400

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