Q. 2

Bill Stewart became a homeowner for the first time in January of 2020; consequently, he acquired a mortgage loan for $950,000. He was immediately advised by his real estate agent that he could deduct home-mortgage interest from his income reported to the IRS. Bill is now planning ahead for the tax year and asks you about the new limitations when it comes to deducting mortgage interest. Which of the following scenarios is the best and most relevant option for Bill?

a) Bill may claim mortgage interest deduction on his primary home. b) Bill may claim mortgage interest deduction on his second home. c) Bill may claim mortgage interest on his home mortgage, limited at $750,000. d) Bill may deduct a home-equity credit line (secured).

Q. 3

Larry, a new tax preparer, is going to prepare Lindas return (a new client for Larry). Linda explains to Larry that she is glad to work for a good company where she makes good money and has great benefits, including a retirement plan and disability coverage. Linda is well organized and presents Larry with all her documents; W-2, 1099-Int, 1098-T and mentions that she was collecting disability for three months due to a car accident. She asks Larry if she needs to report the disability income received during the three months. Larry went through his own checklist of questions to learn more about his client, after that, the following answers were produced by Linda. Which of Lindas answers confirms that her disability income is taxable?

a) Larry, I will be 59 1/2 years old at the end of the year. b) Larry, Im married but separated in the last seven months of the year. c) Larry, I got sick with the pandemic, but my employer pays for all benefits. d) Larry, all my income has been presented, I have no other source of income.