1. Cathy paid $2,000,000 for her principal residence by paying $500,000 down and borrowing the other $1,500,000. Her interest expense for the year is $75,000. How much is her deduction for interest expense?

2.David owns a house with a FMV of $400,000 and acquisition indebtedness (first mortgage) of $250,000. He took out a home equity loan of $120,000 on the house, and used the proceeds to buy jewelry for his new girlfriend. The interest on the home equity loan this year is $9,000. How much of the interest from the home equity loan will be deductible?