Question 62.56 pts

Which of the following statements is false for debt incurred in 2017?

Compliance with the tracing rules is not required for acquisition indebtedness if the expenditures to acquire the residence were made within ninety days either before or after the date the debt is incurred.

A single home mortgage debt can be both acquisition debt and home equity debt at the same time.

The combined amount of home equity indebtedness for which a taxpayer may deduct interest is limited to $1,000,000 ($500,000 for a married couple filing separate tax returns).

If a taxpayer refinances qualified acquisition indebtedness with a new mortgage loan and the proceeds of the new loan are traceable to pay-off the old home mortgage, the interest thereon will be deductible as qualified residence interest.

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Question 72.56 pts

In 2018, what is the maximum amount of home mortgage debt (both acquisition and home equity) upon which a taxpayer may take an itemized deduction for interest expense? The acquisition debt was acquired in June 2017, and the home equity (used to buy a Mercedes) was acquired in September 2018.

$750,000.

$850,000

$1,000,000.

None of the above.

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Question 82.56 pts

Which of the following statements regarding the deductibility of points is false?

Points charged for underwriting services to obtain the loan are deductible as interest because, without those services, the taxpayer would not be able to acquire the loan.

To be fully deductible in the year paid, points must be charged on the taxpayer's residential mortgage and not commercial property, and cannot be paid with borrowed funds.

To be fully deductible in the year paid, points must constitute prepaid interest and must be an established business practice in the area where the loan is made.

To be fully deductible in the year paid, the points paid may not exceed the amount generally charged in the area where the loan is made.

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Question 92.56 pts

Which of the following statements is false?

Points paid in refinancing a residential mortgage are fully deductible in the year the loan is closed providing they meet the area's business practice criteria.

Appraisal fees, preparation costs for legal documents, and notary fees are not for the use or forbearance of money and therefore are not deductible as interest although some lenders may label them as "points."

For mortgages on commercial property, points constitute prepaid interest and may not be deducted in full in the year paid, but instead must be deducted (amortized) over the life of the loan.

If a taxpayer refinances his residential mortgage but fails to pay the points out private funds, and instead had the points deducted from the loan proceeds, the taxpayer may only deduct the points ratably over the life term of the loan.

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Question 102.56 pts

Which of the following statements is false?

Under IRC107 ministers of the gospel may exclude from their gross income the portion of their salary designated as a housing allowance so long as it is all spent for either rent or expenditures related to owning a home (i.e. mortgage payments, taxes, insurance, repairs, etc.).

Because ministers may exclude their housing allowance from gross income, ministers of the gospel may not also deduct residential mortgage interest because to do so will result in a double tax benefit.

Payments on non-redeemable ground rents on a residence are not interest and are not tax deductible.

Redeemable ground rents exist where the economic substance of the lessor's lease interest is primarily a security interest to protect the receipt of rental payments, Such payments are generally treated as interest payments and are subject to the rules on qualified mortgage interest.