Indebtedness?
Q: How much of the $9,000 is interest on acquisition indebtedness and how much is interest on home equity indebtedness? Of the $150,000 principle balance at December 31, how much is acquisition indebtedness and how much is home equity indebtedness?
A: Taxpayer S owns a home with a fair market value of $2,000,000 and a traditional mortgage balance of $900,000. S refinances the traditional mortgage with a home equity line of credit . Shortly after the refinancing, S draws another $400,000 on the line of credit to buy a boat. This brings the principle balance to $1,300,000. In the months that follow (through Dec 31), S makes payments that include interest of $60,000 and principle of $500,000.