McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 41

This year, Major Healy paid $40,000 of interest on a mortgage on his home (Major Healy borrowed $800,000 to buy the residence and it is currently worth $1,000,000), $6,000 on a $120,000 home equity loan on his home, and $10,000 of interest on a mortgage on his vacation home (loan of $200,000; home purchased for $500,000).
a.?How much interest expense can Major Healy deduct as an itemized deduction?
b.?Assume the same facts, except Major Healy does not have the vacation home or related interest.How much interest expense can Major Healy deduct as an itemized deduction?
c.Assume the same facts in a. except that Major Healy's home had a fair market value of $1,000,000 when he purchased the home and took out the home equity debt, but now the home is worth $500,000.How much interest expense can Major Healy deduct as an itemized deduction?