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 53

Lars and Leigha saved up for years before they purchased their dream home.They were considering (1) using all of their savings to make a large down payment on the home (90 percent of the value of the home) and barely scraping by without the backup savings or (2) making a more modest down payment (50 percent of the value of the loan) and holding some of the savings in reserve as needed if funds get tight.They decided to go with the large down payment because they figured they could always refinance the home to pull some equity out of the home if things got tight.What advice would you give them about the tax consequences of their decision?