Rick and Carol Ryan, Married Taxpayers, Took Out a Mortgage

Multiple Choice

Rick and Carol Ryan, married taxpayers, took out a mortgage of $160,000 when purchasing their home ten years ago. In October of the current year, when the home had a fair market value of $200,000 and they owed $125,000 on the mortgage, the Ryans took out a home equity loan for $110,000. They used the funds to purchase a sailboat to be used for recreational purposes. The sailboat does not qualify as a residence. What is the maximum amount of debt on which the Ryans can deduct home equity interest?

A) $75,000
B) $90,000
C) $110,000
D) $125,000
E) None of the above