ibe the tax treatment of the interest paid by cash-basis taxpayers in each of the following situations: a. Billie and Sue purchased a principal residence on December 31, 2017 for $1.4 million, paying $225,000 in cash and financing the balance with a mortgage. b. Taylor takes out a loan of $100,000 on February 15, 2014, and uses the proceeds to buy a residential building lot, which serves as security for the debt. On January 5, 2015, Taylor begins construction of a house on the lot. He completes construction on December 28, 2015 (having spent $300,000, excluding the lot), and moves into the house as his principal residence on New Years Eve of that year. On March 1, 2017, Taylor obtains a mortgage loan for $350,000, secured by the residence. The lender pays off the initial $100,000 debt and disburses the remaining $250,000 to Taylor. c. Rex and Darcie purchased their principal residence on July 1, 1996, taking out an interest-only 30-year $300,000 mortgage. In early 2018, they decided it was time to refinance to take advantage of lower interest rates. Their lender encouraged them to take out a larger mortgage than was needed to pay off the old one, since the rate is so low and their home has doubled in value since they bought it. They signed the new $600,000 15-year fixed rate mortgage on March 14. They used $200,000 of the excess proceeds of $300,000 to remodel the house and spent the other $100,000 on a nice vacation.