Sally and Jim Purchased Their Personal Residence in Santa Barbara

question 96

Essay

Sally and Jim purchased their personal residence in Santa Barbara 20 years ago for $150,000.The home has a fair market value today of $1,000,000.For the current year,they have a $10,000 first mortgage on their home,on which they paid $1,000 in interest.They also have a home equity loan secured by their home with a balance throughout the year of $110,000.The proceeds of the home equity loan were used to send their two children to college.They paid interest on the home equity loan of $11,000 for the year.
Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for 2013.
Qualified residence acquisition debt interest:
Qualified home equity debt interest:

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Definitions:

Wage Rate

The amount of money paid to an employee by an employer in exchange for work performed, usually expressed per hour, day, or piece.

Unionization

The process of organizing workers into a union, a collective organization that negotiates with employers over wages, working conditions, and other labor issues.

Retail Trade

The selling of goods and services directly to consumers, typically in small quantities.

Marginal Labor Cost

The additional cost incurred by hiring one more unit of labor or the cost of producing one additional unit of output with an additional unit of labor.