1. Joyce and Jane purchase only the Hampton home, not the Manhattan condo. (They rent their Manhattan condo, instead.) After purchasing the Hampton home in April, they had no plans to renovate the home, as they liked its gently worn appearance. At least, they thought they did. By September, they are tired of the look and decide that it needs substantial improvements, after all. Thus, they hire an architect, designer, and contractor to design and construct a substantial addition to the home, as well as to renovate the old kitchen and bathrooms, substantially increasing the value of the cottage. The entire project cost is $400,000, all of which is funded by a second mortgage on the home, secured by the home. Thus, in addition to the $6,000 interest paid on the first mortgage this year, they paid $16,000 interest on the second mortgager. How much of their aggregate $22,000 interest can they deduct this year under 163(h)(3)?