Question

Sam buys a house in 2000 for $75,000. He inherits some money in 2001, and pays...

Sam buys a house in 2000 for $75,000. He inherits some money in 2001, and pays off his mortgage loan right away. He continues to live in the house, and it goes up in value to $250,000. Sam decides to take some of his equity out of the house, so in 2019 he gets a mortgage on the house for $200,000, which he invests in the stock market. His stock investments go down in value, and he gets no dividends from the stock. His mortgage-interest expense in 2019 is $12,000.
How much mortgage-interest expense (acquisition debt or home-equity debt) can he “write-off” on Schedule A for 2019?

  1. $           0
  2. $   6,000
  3. $ 12,000

In March of 2020, Sam decides to sell his home, and he receives net cash of $275,000 from the sale.   (After paying off his $200,000 mortgage, he has $75,000 left.) How much “gain” will Sam have realized on the sale of his home?

a. $ 25,000

b. $ 75,000

c. $ 200,000

d. $ 250,000

e. $ 275,000

How much will Sam have to recognize as taxable gain from the sale of his home?

  1. $            0
  2. $ 25,000
  3. $ 75,000
  4. $200,000
  5. $275,000
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