Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000), $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?

Question

Quizplus · Accepted Answer

The credit card interest is nondeductible personal interest and the home equity interest is not deductible. The remaining interest is deductible as qualified residence interest ($15,000) and investment interest ($3,000). The $3,000 investment interest is not restricted by her net investment income ($10,000).

Margaret Lindley Paid $15,000 of Interest on Her $300,000 Acquisition