Exam 14: Tax Consequences of Home Ownership

When a taxpayer rents a residence for part of the year, the residence is not eligible as a qualified residence for the home mortgage interest expense deduction unless the taxpayer's:

On April 1, year 1, Mary borrowed $200,000 to refinance the original mortgage on her principal residence. Mary paid 3 points to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period. How much can Mary deduct in year 1 for her points paid?

Shantel owned and lived in a home for five years before marrying Daron. Shantel and Daron lived in the home for two years before selling it at a $700,000 gain. Shantel was the sole owner of the residence until it was sold. How much of the gain may Shantel and Daron exclude?

A married couple filing a joint tax return is eligible to exclude up to $500,000 of gain realized on the sale of a personal residence if both spouses meet the ownership test and at least one spouse meets the use test.

In certain circumstances, a taxpayer could rent her personal residence at a profit and not pay any tax on the income.

Dawn (single) purchased her home on July 1, 2008. On July 1, 2016 Dawn moved out of the home. She rented out the home until July 1, 2017 when she sold the home andrealized a $230,000 gain (assume none of the gain was attributable to depreciation). What amount of the gain is Dawn allowed to exclude from her 2017 gross income?

Amanda purchased a home for $1,000,000 in year 1. She paid $200,000 cash andborrowed the remaining $800,000. This is Amanda's only residence. Assume that in year10 when the home had appreciated to $1,500,000 and the remaining mortgage was$600,000, interest rates declined and Amanda refinanced her home. She borrowed$1,000,000 at the time of the refinancing, paid off the first mortgage, and used theremainder for purposes unrelated to the home. What is her total amount of qualifying home-related debt for tax purposes?

On November 1, year 1, Jamie (who is single) purchased and moved into her principal residence. In the early part of year 2, Jamie was laid off from her job. On February 1, year 2, Jamie sold the home at a $35,000 gain. She sold the home because she found a new job in a different state. How much of the gain, if any, may Jamie exclude from her gross income in year 2?

A taxpayer who is financing his personal residence and who pays points on the loan in the form of prepaid interest generally must deduct the points over the life of the loan no matter whether the loan is an original loan or a refinance of an existing loan.

Depending on AGI, taxpayers may be able to deduct mortgage insurance premiums as a for AGI deduction.

Taxpayers meeting certain requirements may be allowed to exclude at least a portion ofgain realized on the sale of a principal residence.