In 2005, Ross, Who Is Single, Purchased a Personal Residence

question 22

Essay

In 2005, Ross, who is single, purchased a personal residence for $170,000 and took out a mortgage of $100,000 on the property. In May of the current year, when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage, he took out a home equity loan for $110,000. He used the funds to purchase a BMW for himself and a Lexus SUV for his wife. For both vehicles, 100% of the use is for personal activities. What is the maximum amount on which Ross can deduct home equity interest?

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Definitions:

Welfare State

A social system in which the government assumes primary responsibility for the welfare of its citizens by providing services such as healthcare, education, and financial support.

Public Works Administration

A New Deal agency in the United States (1933-1944) created to provide public infrastructure jobs in the wake of the Great Depression.

Filipino Repatriation Act

Legislation passed in the United States in 1935, encouraging Filipinos living in the U.S. to return to the Philippines by offering free transportation.

Filipinos

The people native to or citizens of the Philippines, an archipelagic country in Southeast Asia.