RTRP test sample question

[Questionguy101]

The following is one of the sample questions of the RTRP test:

In the current year, the taxpayer paid $5,000 in mortgage interest on a primary residence, $1,500 mortgage interest on a vacation home, and $2,000 in loan interest on a recreational vehicle with sleeping, cooking, and toilet facilities. What is the taxpayer's maximum mortgage interest deduction?
A.$5,000
B.$6,500
C.$7,000
D.$8,500

The answer is C.$7,000. Based on it, they must think the $5,000 on a primary residence and the $2,000 on a recreational vehicle is deductible while the $1,500 on a vacation home is not. Based on my understanding, mortgage interest on a second home (vacation home) should be deductible too. So does anyone understand why the answer does not include the $2,000 mortgage interest on a vacation home?

[Gene V]

You can only deduct mortgage interest on one second home—you can use either the vacation home or the recreation vehicle(which is a home)- you can choose either one each year, doesn’t have to be the same one every year.

[S T]

See Pub 936 (Part II) - also Pub 17 (page 155)

Qualified Home
For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.

Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.

Second home. A second home is a home that you choose to treat as your second home.

You can only have a Main Home and (one) second Home for Qualified Mortgage Interest - providing all of the other conditions are met . Second home is the home you choose to treat as a second home -

In your example since the loan interest on the RV that qualifies is higher - the T/p would choose the RV as a 2nd home - You can not have "two 2nd homes" as in Vacation Home and also treat a RV that would qualify. Either-Or-but not both in addition to the Main Home.

Sandy

[New York Enrolled Agent]

IRC §163(h)(4)

(A) Qualified residence

(i) In general
The term "qualified residence" means--

(I) the principal residence (within the meaning of section 121) of the taxpayer, and
(II) 1 other residence of the taxpayer which is selected by the taxpayer for purposes of this subsection
for the taxable year and which is used by the taxpayer as a residence (within the meaning of section 280A(d)(1)).

[FEDUKE404]

Without getting technical

The following is one of the sample questions of the RTRP test:

In the current year, the taxpayer paid $5,000 in mortgage interest on a primary residence, $1,500 mortgage interest on a vacation home, and $2,000 in loan interest on a recreational vehicle with sleeping, cooking, and toilet facilities. What is the taxpayer's maximum mortgage interest deduction?
A.$5,000
B.$6,500
C.$7,000
D.$8,500

The answer is C.$7,000. Based on it, they must think the $5,000 on a primary residence and the $2,000 on a recreational vehicle is deductible while the $1,500 on a vacation home is not. Based on my understanding, mortgage interest on a second home (vacation home) should be deductible too. So does anyone understand why the answer does not include the $2,000 mortgage interest on a vacation home?

The $2,000 interest is from the RV, which is allowable with the facts stated. Of course, the interest on the vacation home is also, theoretically, allowable **IF** the RV interest is not claimed.

The other important part of the question is not related to what "might" be deductible, but rather to what the maximum allowable deduction is.

If all else fails.....read the question!

FE

[arlo]

RTRP test

I never looked up any of the questions on the test and passed. But I bet I missed that one.

[Questionguy101]

Thank you for all your replies. I understand a taxpayer can only have one second home for tax deduction. My major confusion was why they would arbitrarily pick the RV but not the vacation home as the second home. But now I know it's because of the word "maximum" in the question. Like someone has said, I should have read the question more thoroughly and carefully.