Question

On November 1, year 1, Jamie (who is single) purchased and moved into her principal residence. In the early part of year 2, Jamie was laid off from her job. On February 1, year 2, Jamie sold the home at a $63,500 gain. She sold the home because she found a new job in a different state. How much of the gain, if any, may Jamie exclude from her gross income in year 2?

A) $0

B) $6,350

C) $31,250

D) $63,500

Jessica purchased a home on January 1, 2018 for $580,000 by making a down payment of $230,000 and financing the remaining $350,000 with a 30-year loan, secured by the residence, at 6 percent. During 2018 and 2019, Jessica made interest-only payments on this loan of $21,000 (each year). On July 1, 2018, when her home was worth $580,000 Jessica borrowed an additional $145,000 secured by the home at an interest rate of 8 percent. During 2018, she made interest-only payments on the second loan in the amount of $5,800. During 2019, she made interest only on the second loan in the amount of $11,600. What is the maximum amount of the $32,600 interest expense Jessica paid during 2019 may she deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard? (Assume not married filing separately.)

• $0.

• $11,600.

• $30,682.

• $7,200.

• $32,600.

On July 1 of year 1, Elaine purchased a new home for $755,000. At the time of the purchase, it was estimated that the property tax bill on the home for the year would be $15,100 ($755,000 × 2%). On the settlement statement, Elaine was charged $7,550 for the year in property taxes and the seller was charged $7,550. On December 31, year 1 Elaine discovered that the real property taxes on the home for the year were actually $16,100. Elaine wrote a $16,100 check to the local government to pay the taxes for that calendar year (Elaine was liable for the taxes because she owned the property when they became due). What amount of real property taxes is Elaine allowed to deduct for year 1? (Assume not married filing separately.)

• $0.

• $7,550.

• $8,050.

• $8,550.

• $16,100.

Ilene rents her second home. During the year, Ilene reported a net loss of $9,600 from the rental. If Ilene is an active participant in the rental and her AGI is $131,500, how much of the loss can she deduct against ordinary income in the year?

• $9,600.

• $350.

• $9,250.

• $0.

Answer 1