Certified Regulatory Compliance Manager (CRCM) — Question 289

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?

Answer options

Correct answer: B

Explanation

The interest that can be reported to the IRS as deductible is typically associated with loans for qualified expenses. In this case, only Loan C for tax payment, which incurred $1,000 in interest, is likely deductible. The other loans do not qualify for reporting as deductible interest, hence the total reported will be $1,000.