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

Exercise 5

Barbi really wants to acquire an expensive automobile (perhaps more expensive than she can really afford).She has two options.Option 1: finance the purchase with an automobile loan from her local bank at a 7 percent interest rate or Option 2: finance the purchase with a home-equity loan at a rate of 7 percent.Compare and contrast the tax and nontax factors Barbi should consider before deciding which loan to use to pay for the automobile.Barbi typically has more itemized deductions than the standard deduction amount.