Question
Javier and Anita Sanchez purchased a home on January 1, 2015, for $500,000 by paying $200,000 down and borrowing the remaining $300,000 with a 7
Javier and Anita Sanchez purchased a home on January 1, 2015, for $500,000 by paying $200,000 down and borrowing the remaining $300,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes marginal tax rate is 30 percent. |
a. | What is the after-tax cost of the interest expense to the Sanchezes in 2015? after-tax cost of the interest expense: ????
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