2. Carlo, who is married, has decided to purchase a home for him and his wife to live in after he retires for $450,000. He has $50,000 in cash for the down payment, but must borrow the remaining $400,000 to finance the purchase. Carlo's financial advisor Sonny suggests that rather than obtain a conventional mortgage, Carlo should borrow the funds and use his portfolio of appreciated securities as collateral. All of the securities in Carlo's portfolio have been held by him for at least five years. Sonny believes that selling securities from Carlo's portfolio to generate the $400,000 in cash for the retirement home purchase would be "an unmitigated disaster because substantial capital gains tax (assume a Federal rate of 23.8%) would be due. Therefore, Sonny believes that it is a better strategy for Carlo to borrow against the securities and claim a deduction for the interest paid on that loan. a. Evaluate the pros and cons of Darios suggested strategy from a Federal income tax perspective. b. Provide an alternative to Dario's suggested strategy and briefly describe the Federal income tax effects of your alternative strategy. 2. Carlo, who is married, has decided to purchase a home for him and his wife to live in after he retires for $450,000. He has $50,000 in cash for the down payment, but must borrow the remaining $400,000 to finance the purchase. Carlo's financial advisor Sonny suggests that rather than obtain a conventional mortgage, Carlo should borrow the funds and use his portfolio of appreciated securities as collateral. All of the securities in Carlo's portfolio have been held by him for at least five years. Sonny believes that selling securities from Carlo's portfolio to generate the $400,000 in cash for the retirement home purchase would be "an unmitigated disaster because substantial capital gains tax (assume a Federal rate of 23.8%) would be due. Therefore, Sonny believes that it is a better strategy for Carlo to borrow against the securities and claim a deduction for the interest paid on that loan. a. Evaluate the pros and cons of Darios suggested strategy from a Federal income tax perspective. b. Provide an alternative to Dario's suggested strategy and briefly describe the Federal income tax effects of your alternative strategy