Mr. Roberts has three loans at First National Bank: Loan A made to purchase a car, secured by the car; Loan B made to purchase stock, secured by a lake lot; and Loan C made to pay taxes, secured by a rental house he owns. Last year he paid $2,500 in interest on Loan A; $550 in interest on Loan B; and $1,000 in interest on Loan C. How much interest will First National Bank report to the IRS?
First National Bank will report the total amount of interest paid on all loans to the IRS. Mr. Roberts paid $2,500 in interest on Loan A, $550 in interest on Loan B, and $1,000 in interest on Loan C. Adding these amounts together, we get a total of $4,050. Therefore, the correct amount of interest that First National Bank will report to the IRS is $4,050.
Loan A: $2,500 in interest (not reportable as mortgage interest) Loan B: $550 in interest (reportable) Loan C: $1,000 in interest (reportable) The total amount of interest that First National Bank will report to the IRS is the sum of the interest from Loans B and C: