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 13

{Planning} On January 1, year 1 Brandon and Alisa Roy purchased a home for $1. million by paying $500,000 down and borrowing the remaining $1 million with a 7 percent loan secured by the home.Later the same day, the Roys took out a second loan, secured by the home, in the amount of $300,000.
a.Assuming the interest rate on the second loan is 8 percent.What is the maximum amount of the interest expense the Roys may deduct on these two loans in year 1?
b.Assuming the interest rate on the second loan is 6 percent, what is the maximum amount of interest expense the Roys may deduct on these two loans in year 1?