Reference no: EM131794376

Assignment

David Dental, DDS, and Sally Surgeon, MD, have lived together for the past five years but are not married. Both are at the peak of their careers and decide to buy a new "showcase" home in La Jolla, California. After looking at several homes in the area, they buy one for $2 million. They make a 20 percent down payment ($400,000) on the house and finance the balance ($1.6 million). Each takes out a separate mortgage for $800,000 for a total $1.6 million. There is no other debt (e.g. a home equity loan) on the residence. Both David and Sally are single taxpayers and are your tax clients. Each pays $48,000 on their respective mortgages in the current year. You are in the process of preparing their current tax returns.

a. Locate the Code section(s) that deals with this situation. State the section number(s).

b. Review the Code section(s). Does it raise a need for new information to solve this question?

c. Are you able to reach a conclusion about the research question from this Code section? If so, what is your conclusion(s)?