Patrick purchased a home on January 1, 2021, for $600,000 by making a down payment of $100,000 and financing the remaining $500,000 with a 30-year loan, secured by the residence, at 6 percent. During 2021, Patrick made interest-only payments on the loan of $30,000. On July 1, 2021, when his home was worth $600,000, Patrick borrowed an additional $75,000 secured by the home at an interest rate of 8 percent. He used the $75,000 loan proceeds to purchase a new car. During 2021, he made interest-only payments on this loan in the amount of $3,000. What amount of the $33,000 interest expense that Patrick paid during 2021 may he deduct as an itemized deduction?
Patrick purchased a home on January 1, 2021, for $600,000 by making a down payment of $100,000 and financing the remaining $500,000 with a 30-year loan, secured by the residence, at 6 percent. During 2021, Patrick made interest-only payments on the loan of $30,000. On July 1, 2021, when his home was worth $600,000, Patrick borrowed an additional $75,000 secured by the home at an interest rate of 8 percent. He used the $75,000 loan proceeds to purchase a new car. During 2021, he made interest-only payments on this loan in the amount of $3,000. What amount of the $33,000 interest expense that Patrick paid during 2021 may he deduct as an itemized deduction?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please don't give image format
a. 0
b. 3000
c. 30000
d. 33000
Transcribed Image Text:Patrick purchased a home on January 1, 2021, for $600,000 by making a down payment of $100,000
and financing the remaining $500,000 with a 30-year loan, secured by the residence, at 6 percent.
During 2021, Patrick made interest-only payments on the loan of $30,000. On July 1, 2021, when his
home was worth $600,000, Patrick borrowed an additional $75,000 secured by the home at an
interest rate of 8 percent. He used the $75,000 loan proceeds to purchase a new car. During 2021, he
made interest-only payments on this loan in the amount of $3,000. What amount of the $33,000
interest expense that Patrick paid during 2021 may he deduct as an itemized deduction?
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