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QUESTION

Cathy buys a house (her principal residence) for $2,500,000, paying $500,000 down and borrowing the other $2,000,000 at 5% interest.

Cathy buys a house (her principal residence) for $2,500,000, paying $500,000 down and borrowing the other $2,000,000 at 5% interest. If her interest expense for the year is $100,000, how much will her maximum deduction for interest expenses be?

a. $100,000

b. $50,000

c. $55,000

d. $37,500

e. $0

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