1. To take advantage of the rising value if their home and the current low interest rate environment, John and Jack, married but filing separately, decide to refinance their home mortgage. they had purchased their house 10 years ago for $200,000 but now the value is approximately $350,000. At purchase they haf put 30% down and financed the rest at a mortgage rate of 5% fixed. at the time of refinancing, the principal balance on the loan is $110,000. The decide to borrow $150,000 at 3% and pay iff the remaining principal balance kn the original loan. How kuch of the interest on the refinanced loan is deductible?

1. a. A year after refinancing the house, Jack get's a job in a different state and they must sell their house. there has been a selling boom in their neighborhood and the house sells for $500,000. They purchase a small house near Jack's new job for $120,000. What are the tax consequences of these transactions?