Question

Frank, age 38, is a single taxpayer and is the sales manager of Standard Co., an...

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 lock copy cut paste
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 lock copy cut paste
A B
1 Total amount from table above

123

2 AGI limitation (in dollars)
3 Total amount deductible on Schedule A

Homework Answers

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
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