1. In case of refinancing of the loan, the deduction for the interest is being given depending upon the use of the loan. As interest on the old loan is deductible then the interest on new loan will also be deductible. The interest deductible on the refinanced loan= 110000*3%= 3300
2. When Jack is selling the house then the provisions of capital gains will apply in relation to the excess of the selling price over the cost of acquisition and the amount invested in other house will also be deductible. The taxable capital gain= 500000-120000-200000= 180000
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