1. Jacob and Chloe are married and together have AGI of $30,000. They have two dependents and file a joint return. Each pays $1,200 for hospitalization insurance. During the year, they paid the following amounts for medical care: $7,000 in doctor and dentist bills and hospital expenses, and $1,700 for prescribed medicine and drugs. In December, they received an insurance reimbursement of $2,700 for hospitalization. Determine the deduction allowable for medical expenses paid during the year.

a. $11,100.

b. $9,150.

c. $8,850.

d. $6,150.

e. None of the above.

2. Samuel and Lopita, married taxpayers, took out a mortgage on their home for $150,000 in 2004. In May of 2010, when the home had a fair market value of $175,000 and they owed $100,000 on the mortgage, they took out a home equity loan for $120,000. They used the funds to purchase a single engine airplane to be used for recreational travel purposes. What is the maximum amount of debt on which they can deduct home equity interest?

a. $75,000.

b. $100,000.

c. $120,000.

d. $175,000.

e. None of the above.