EBK CONCEPTS IN FEDERAL TAXATION 2019
26th Edition
ISBN: 9781337671774
Author: Murphy
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 32P
To determine
Explain whether D recognizes any income from the cancellation of loan in 2018.
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Kate acquires a principal residence in 2017 for $200,000 secured by a $180,000 mortgage. In 2021, Kate catches the coronavirus and misses work for 3 months. Her employer stops paying her after 10 days. In 2021 when the mortgage balance is $170,000, Kate and the bank revise her terms and lower the loan balance to $150,000. The market value of the home remains above $200,000. How much cancellation of debt income will Kate recognize?
(a) In 2010 Jim loaned Patti $4,500, as a personal loan. In 2014 (when the outstanding loan
is still $4,500), Patti informs Jim that she will not be able to repay the loan. In 2014, Jim
has $1,000 short-term capital gain and $40,000 wage income. In 2015, Patti repays the
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(b) Suppose, instead, that the loan in part (a) was a business loan. How much, if any, of the
2015 repayment does Jim need to include in his income?
Leticia purchased a home on July 1, 2017, for $240,000. She paid $216,000 down and financed the remaining $24,000. On January 1, 2019, when the outstanding balance of her mortgage was $18,000 and her home was valued at $360,000, Leticia refinanced her home for $240,000. With the $240,000 loan, she paid off the remaining $18,000 balance of her original mortgage, she used $39,000 to substantially improve her home, and she used the remaining $183,000 for purposes unrelated to her home. During 2021, Leticia made interest-only payments of $20,000 on the loan. What amount of the $20,000 interest expense is Leticia allowed to deduct in year 2021? (Enter only numbers with no dollar signs or other punctuation.)
Chapter 3 Solutions
EBK CONCEPTS IN FEDERAL TAXATION 2019
Ch. 3 - Prob. 1DQCh. 3 - Prob. 2DQCh. 3 - Prob. 3DQCh. 3 - Prob. 4DQCh. 3 - Prob. 5DQCh. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Prob. 9DQCh. 3 - Prob. 10DQ
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