Question

22. Michael (single) purchased his home on July 1, 2007. On July 1, 2015 he moved out of the home. He rented out the home until July 1, 2016 when he moved back into the home. On July 1, 2017 he sold the home and realized a $305,000 gain. What amount of the gain is Michael allowed to exclude from his 2017 gross income?

MULTIPLE CHOICE

$0

$225,000

$250,000

$305,000

23. In year 1, Kris purchased a new home for $660,000 by making a down payment of $528,000 and financing the remaining $132,000 with a loan, secured by the residence, at 5 percent. As of January 1, year 4, the outstanding balance on the loan was $99,000. On January 1, year 4, when his home was worth $726,000, Kris refinanced the home by taking out a $453,000 mortgage at 5 percent. With the loan proceeds, he paid off the $99,000 balance of the existing mortgage and used the remainder for purposes unrelated to the home. During year 4, he made interest only payments on the new loan of $22,650. What amount of the $22,650 interest expense on the new loan can Kris deduct in year 4 on the new mortgage as home related interest expense?

MULTIPLE CHOICE

$9,450

$16,050

$9,950

$22,650

24. Amanda purchased a home for $800,000 in year 1. She paid $160,000 cash and borrowed the remaining $640,000. This is Amanda's only residence. Assume that in year 10 when the home had appreciated to $1,200,000 and the remaining mortgage was $480,000, interest rates declined and Amanda refinanced her home. She borrowed $800,000 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 qualifying home-related debt for tax purposes?

MULTIPLE CHOICE

$480,000

$560,000

$800,000

$880,000

25. On March 31, year 1, Mary borrowed $220,000 to buy her principal residence. Mary paid 2 points to reduce her interest rate from 8 percent to 7 percent. The loan is for a 30-year period. What is Mary's year 1 deduction for her points paid?

MULTIPLE CHOICE

$37

$110

$3,300

4,400

Answer 1

22) Option C, $250000 is the answer.

In order to avail an exclusion of gain, on sale of property, a tax payer needs to own and occupy the property as principle residence for two out of five years immediately preceding the sale. For this purpose, ownership and occumpency dont have to be concurrent. The maximum gain exclusion permitted is $250000. As Michel satisifes the requirement, he is eligible to exclude the same.

23)Option D is correct. Entire interest expense on the new loan can Kris deduct in year 4 on the new mortgage can be taken as home related interest expense i.e $22650

24)Option B is correct.$480000 Acquisition Indebtedness+$80000 qualified home equity indebtedness =$560000

25)Option B is correct .

$22000*2% = $4400 , number of months = 12*30years = 360months

Deduction on points paid = $4400/360*9months = $110