Explain how much of the mortgage can they deduct for regular

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Reference no: EM13123149

Bill and Ann bought a home in 1970 for $100,000. They put $20,000 down. The original $80,000 mortgage was refinanced for $200,000 on October 13, 1987 when the Fair Market Value of the home was $300,000. That refinanced mortgage of $200,000 has only 13 years left on its 30 year timeframe with a remaining balance outstanding of $100,000. They come to CNB today when the home is worth $1,200,000 looking to take cash out of $800,000.00. They are approved for the loan (6% interest) and you send them a check for the $800,000 with a total refinance of $900,000 (the first, $100,000, went to former loan pay off).

They use the $800,000 proceeds to pay off $200,000 in credit card debt, $300,000 to buy that exotic Ferrari and $300,000 to buy a cigarette boat with no head, no galley and no sleeping quarters (but it is fast and burns a lot of fuel). Interest upon how much of the mortgage can they deduct for regular tax purposes and where is it deducted if it is deductible ?

Interest upon how much of the mortgage can they deduct for AMT tax purposes ??

Reference no: EM13123149

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