Kimberly purchased a home on January 1, 2014 for $500,000 by making a down payment of $200,000 and financing the remaining $300,000 with a 30-year loan, secured by the residence, at 6 percent. During 2014 and 2015 Kimberly made interest-only payments on the loan in the amount of $18,000 each year. On July 1, 2014, when her home was worth $500,000, Kimberly borrowed an additional $125,000 secured by the home at an interest rate of 8 percent. During 2014, she made interest-only payments on this loan in the amount of $5,000 and during 2015 she made interest only payments on the loan in the amount of $10,000. What is the maximum amount of the $28,000 interest expense Kimberly paid during 2015 that she may deduct as an itemized deduction, if she used the proceeds of the second loan to pay off student loans from law school?

Kimberly purchased a home on January 1, 2014 for $500,000 by making a down payment of $200,000 and financing the remaining $300,000 with a 30-year loan, secured by the residence, at 6 percent. During 2014 and 2015 Kimberly made interest-only payments on the loan in the amount of $18,000 each year. On July 1, 2014, when her home was worth $500,000, Kimberly borrowed an additional $125,000 secured by the home at an interest rate of 8 percent. During 2014, she made interest-only payments on this loan in the amount of $5,000 and during 2015 she made interest only payments on the loan in the amount of $10,000. What is the maximum amount of the $28,000 interest expense Kimberly paid during 2015 that she may deduct as an itemized deduction, if she used the proceeds of the second loan to pay off student loans from law school?

Kimberly purchased a home on January 1, 2014 for $500,000 by making a down payment of $200,000 and financing the remaining $300,000 with a 30-year loan, secured by the residence, at 6 percent. During 2014 and 2015 Kimberly made interest-only payments on the loan in the amount of $18,000 each year. On July 1, 2014, when her home was worth $500,000, Kimberly borrowed an additional $125,000 secured by the home at an interest rate of 8 percent. During 2014, she made interest-only payments on this loan in the amount of $5,000 and during 2015 she made interest only payments on the loan in the amount of $10,000. What is the maximum amount of the $28,000 interest expense Kimberly paid during 2015 that she may deduct as an itemized deduction, if she used the proceeds of the second loan to pay off student loans from law school?


A. $0

B. $5,000

C. $18,000

D. $26,000

E. $26,353


Answer: E


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