Problem 5-5 Taxes (LO 5.2) Mike sells his home to Jane on April 2, 2016. Jane pa

Question

Problem 5-5 Taxes (LO 5.2) Mike sells his home to Jane on April 2, 2016. Jane pays the property taxes covering the full calendar year in October, which amount to $2,500. How much may Mike and Jane each deduct for property taxes in 2016? Note: Because 2016 is a leap year, use 366 days in year. ny division to five decimal places and use rounded amounts in subsequent computations. Round your final answers to the nearest dollar Mike deduction Jane deduction Interest (LO 5.3) Matthew borrows $250,000 to invest in bonds. During the current year, his interest on the loan is $30,000. Matthew's interest income from Calculate Matthew's itemized deduction for investment interest expense for the year. b. Is Matthew entitled to a deduction (related to the investment interest expenseyin futyre years? Yes. Interest (LO 5.3) 20,000

Explanation / Answer

1. Mike Deductions = 2500x91/366 = $622

Jane Deduction = 2500x275/366 = $1878

2. a. Matthews itemized deduction for invesstment interest expense for this year $10000

b. Mathew entitled to deduction in uture years : Yes for 20,000 (10000 - 30000)

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