Question

Frank, age 38, is a single taxpayer and is the sales manager of Standard Co., an auto stereo dealer. Frank's adjusted gross income (AGI) for the year is $67,000.

During the year, Frank made the interest payments shown in the following table. Enter the amounts that are reportable interest expense deductions, if any. If none of a particular payment is a reportable interest expense deduction, enter a zero (0) for that expense. Enter the total amount deductible on Schedule A, Itemized Deductions, of Form 1040, U.S. Individual Income Tax Return

Note: Disregard all AGI limitations, if any, in completing the first section of this table. Then follow the instructions in the table in completing the second section. Assume that the $1,000,000 limitation on mortgage indebtedness is not exceeded.

A1

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A

B

C

1

Interest payment

Amount

Amount reportable on Schedule A

2

Mortgage interest paid on principal residence

11,400

123

3

Points on 30-year mortgage for the purchase of the principal residence paid on June 30 of the current year

4,200

123

4

Mortgage interest paid on commercial rental property

2,150

123

5

Interest paid on personal credit cards

470

123

6

Interest paid to IRS for late filing of income tax return

25

123

7

Interest paid on a $50,000 home equity loan; the FMV of the home exceeds the acquisition indebtedness by $70,000

475

123

8

Total

18,720

123

In the following section, indicate the dollar amount of any limitations that apply to the expenses above. Enter any limitation as a negative number.

A1

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A

B

1

Total amount from table above

123

2

AGI limitation (in dollars)

3

Total amount deductible on Schedule A

Answer 1

Statement showing allowable interest deductions to Frank for the year ---

Particulars	Amount $	Allowable Amt $	Explanation if any
Mortgage interest paid on principal residence	11400	11400	Qualified home
Points on 30 year mortgage	2400	2400	=do=
Mortgage interest paid on commercial property	2150	2150
Interest on personal credit card	470	0	being personal expense
Interest paid to IRS for late filing of income tax return	25	0	Its a failure penalty and cannot be claimed as deduction as per IRS rules.
Interest paid on a $50,000 home equity loan	475	475	Assuming that the limit is not exceeded
Total allowable deductions		16425
AGI limitation in dollars		$69000
Total allowable deductions		16425