Acc 307 Tax Research Problem 1

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Research Problem 1
ACC 307
February 24, 2010

Deduction interest has been an arguable topic since 1913. The four types of allowed qualified interest are as followed. a) Interest on Qualified Student Loans
b) Investment Interest
c) Qualified Residence Interest (home mortgage)
d) Business Interest
Interest on Qualified Student Loans
Interest on qualified student loan can deduct the interest as a deduction for AGI. This deduction is permitted if the money borrowed was used to finance qualified education expense. In order to deduct the interest on Qualified Student Loan the money must have been paid qualified education expense. The maximum deduction is $2,500 and is phased out for taxpayers with modified AGI in excess of certain amounts. The deduction is not allowed for taxpayers who are claimed as dependents or for married taxpayers filing separately (Willis, Maloney, Raabe, & Young, 2010 page 10-14). Investment Interest

The course of action a Taxpayer must take to be able to deduct Investment Interest is that he or she borrows funds to acquire investment assets. Therefore, a significant tax benefit can occur, when the interest expense is high in comparative to the income from the investment. “However, Congress has limited the deductibility of interest on funds borrowed for the purpose of purchasing or continuing to hold investment property” (Willis, Maloney, Raabe, & Young, 2010) page 11-25 Qualified Residence Interest (home mortgage)

What is Qualified Residence Interest? And what are the categories under Qualified Residence Interest? Qualified residence interest is interest paid or accrued on indebtedness (subject to limitations) secured by a qualified residence of the taxpayer. (Willis, Maloney, Raabe, & Young, 2010) pg10-15. The two categoriez under Qalified Residence Interest are interest on acquisition indebtedness and interest on home equity loans. The qualified residence is the principal...
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