25 May Question 1. For purposes of computing the deduction for qualified
Question
1. For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer’s principal residence.
a. True
b. False
2. For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer’s principal residence and two other residences of the taxpayer or spouse.
a. True
b. False
3. Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns) is deductible as qualified residence interest.
a. True
b. False
4. A taxpayer pays points to obtain financing to purchase a second residence. At the election of the taxpayer, the points can be deducted as interest expense for the year paid.
a. True
b. False
5. Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.
a. True
b. False
6. Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase. Jack can deduct the points as interest.
a. True
b. False
7. Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early. The $1,600 is deductible as interest expense.
a. True
b. False
8. Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds. The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.
a. True
b. False
.
9. Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2014. He prepaid all $3,600 of the interest on the loan on December 1, 2014. Joe can deduct only $300 of the prepaid interest in 2014.
a. True
b. False
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