Each of the following independent Cases involves the payment of interest and the issue of whether the interest will be deductible for tax purposes.

Case A Joan Allenby has owned her home for many years and, over this period of time, has completely paid off the mortgage. Given the low interest rates that are available on mortgages, she negotiates a $300,000, five year, variable rate mortgage, with an interest rate of 2.5 percent. She invests the entire $300,000 in publicly traded securities. Would the interest on the mortgage be deductible? Explain your conclusion.

Case B Athro Tulee borrows $50,000 and acquires an income producing property for $50,000. He subsequently sells the property for $80,000. Without repaying the funds borrowed to acquire the first property, he uses the proceeds to acquire two other properties. The cost of property A is $32,000, while the cost of property B is $48,000. How will the $50,000 in borrowing be linked to the two new properties?

Case C Janice Bronson borrows $250,000 and invests the entire amount in the shares of Nor-Tell Ltd. Three months later, after the discovery of significant accounting irregularities at Nor-Tell, the value of the shares has fallen to $30,000. She sells her shares and uses the proceeds to pay off $30,000 of the loan. This leaves a balance of $220,000. Can Janice continue to deduct the interest payments on this $220,000 balance? Explain your conclusion.