Peter purchased a home on January 1, 2018, for $700,000 by making a down payment of $100,000 and financing the remaining $600,000 with a 30-year loan, secured by the residence, at 6 percent. During 2019, Peter made interest-only payments on the loan of $35,000. On July 1, 2019, when his home was worth $900,000, Patrick borrowed an additional $85,000 secured by the home at an interest rate of 8 percent. He used the $85,000 loan proceeds to purchase a new car. During 2019, he made interest-only payments on this loan in the amount of $5,000. What amount of the $40,000 interest expense that Peter paid during 2019 may he deduct as an itemized deduction?

Select one:

a. $0.

b. $40,000

c. $35,000.

d. $5,000.