1. Look at the Form 1040 you prepared for Nicolai. What is the amount on Form 1040, Line 40?

A. $ 11,217.
B. $ 11,043.
C. $ 11,456. 
D. $ 11,128.

2. Look at the Form 1040 you prepared for Nicolai. What is the amount on Form 1040, Line 73a?

A. $ 629.
B. $ 554.
C. $ 584.
D. $ 144.

3. If you do not meet the tests to fully deduct points in the year paid, later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if

A. You use the cash method of accounting and your loan is secured by a home.
B. Your loan period is not more than 30 years, and if your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period.
C. Either your loan amount is $250,000 or less, or the number of points is not more than 4, if your loan period is 15 year or less, or 6 points if your loan period is more than 15 years.
D. All of the above.

4. Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. This is true,

A. Unless the new mortgage is secured by your main home.
B. Even if the new mortgage is secured by your main home.
C. Unless the new mortgage is secured by your second home.
D. Even if the new mortgage is secured by a second home.

5. Guillermo and Laura sold their home on May 7. Through April 30, they made home mortgage interest payments of $1,300. The settlement sheet for the sale of the home showed $80 interest for the 6-day period in May up to, but not including the date of sale. Their mortgage interest deduction is

A. $ 80.
B. $ 1,300.
C. $ 1,380.
D. None of the above.

6. If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply),

A. Paid up to and including the date of sale.
B. Paid up to, but not including the date of sale.
C. Paid up to six months after the date of sale.
D. None of the above.

7. You can deduct all of the interest on mortgages you took out on or before October 14, 1987 (called grandfathered debt).                   

True False

8. If your adjusted gross income is more than $159,950 ($79,975 if you are married filing separately), the overall amount of your itemized deductions may be limited.                   

True False

9. As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Points not included on Form 1098

A. Also may be deductible.
B. Are never deductible.
C. Should not show any interest that was paid for you by a government agency.
D. None of the above.

10. You can treat amounts you paid during 2008 for qualified mortgage insurance as home mortgage interest. Qualified mortgage insurance is mortgage insurance provided by the

A. Department of Veteran Affairs.
B. Federal Housing Administration or the Rural Housing Service.
C. Private mortgage insurance as defined in section 2 of the Homeowner Protection Act of 1998 as in effect on December 20, 2006.
D. Any of the above.

11. You can treat amounts you paid during the 2008 year for qualified mortgage insurance as home mortgage interest. To do so,

A. The insurance must be in connection with home acquisition debt.
B. The insurance contract must have been issued after 2006.
C. The mortgage insurance contract must have been issued in 2008.
D. Both A and B above.

12.  You can fully deduct points in the year paid if you meet certain tests. If you meet these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the the life of the loan. Which of the following would disqualify points from being fully deductible in the year paid?

A. The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. 
B. The funds can be borrowed funds from the lender or mortgage broker.
C. You loan is secured by your main home (Your main home is the one you ordinarily live in most of the time).
D. You use the cash method of accounting.

13. What is not deductible as home mortgage interest?

A. Home mortgage interest that is secured by a debt.
B. Certain points and mortgage insurance premiums.
C. A debt secured solely because of a lien on your general assets or a security interest that attaches to the property without your consent.
D. All of the above.

14. Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. You can deduct home mortgage interest only if

A. You are legally liable for the loan and the mortgage is a secured debt on a qualified home in which you have an ownership interest.
B. There is a true debtor-creditor relationship between you and the lender.
C. You must file Form 1040 and itemized deductions on Schedule A (Form 1040).
D. All of the above.

15. The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. You generally cannot deduct the full amount of points in the year paid because they are prepaid interest, unless

A. Your home is secured by your main home (Your main home is the home you live in  most of the time).
B. Paying points is not an established business practice in the area where the loan was made.
C. The points paid were more than the points generally charged in that area.
D. All of the above.

16. If you and at least one more person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year,

A. You cannot deduct the mortgage interest because the person for whom it was reported has to report the interest.
B. You can take turns and alternate the reporting on interest expense each year.
C. Attach a statement to your return and report only the interest you paid, and give information for person who received the form and on line 11 print "See attached" next to the line.
D. To avoid complications, you should not report any mortgage interest for the years that both of you are on the loan documents.

17. You may be able to claim a mortgage interest credit if you were issued a mortgage interest credit certificate (MCC) by a state or local government. If you take this credit, you must

A. Not have Income from investing in properties.  
B. Figure the credit on Form 8102.
C. Reduce your mortgage interest deduction by the amount of the credit.
D. All of the above.

18. Which of the following would disqualify points from being fully deductible in the year paid?

A. The points were computed as a percentage of the principal amount of the mortgage.
B. The loan proceeds were used to purchase a second home.
C. The payment of points in common in your area.
D. The points are clearly stated on the settlement statement as points charged for the mortgage.

19. When you took out a $150,000 mortgage loan secured by your main home in December 2008,  you were charged two points ($2,000). You meet all the tests for deducting points in the year paid. Of which you paid $1,600 in December and the rest $400 in January 2009. How do you deduct your points paid?

A. You can fully deduct $2,000 in 2008 (in year paid) or over the life of your loan. 
B. You can deduct $400 in 2008; and $2,000 over the life of the mortgage.
C. You can deduct $1,600 in 2008; and $600  over the life of the mortgage.
D. None of the above.

20. Amounts charged by the lender for specific services connected to the loan are not interest. The following are examples of theses charges, except for

A. Appraisal fees.
B. Preparation costs for the mortgage note or deed of trust.
C. Notary fees.
D. Mortgage insurance premiums.