David, a Single Taxpayer, Took Out a Mortgage on His

Multiple Choice

David, a single taxpayer, took out a mortgage on his home for $300,000 nine years ago. In August of this year, when the home had a fair market value of $550,000 and he owed $225,000 on the mortgage, he took out a home equity loan for $350,000. David used the funds to purchase a yacht to be used for recreational purposes. What is the maximum amount of debt on which he can deduct home equity interest?

A) $50,000.
B) $100,000.
C) $325,000.
D) $350,000.
E) None of the above.