Currently deducts the mortgages interest on her tax return

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Fran who is in the 35% tax bracket, recently collected $100,000 on a life insurance policy she carried for her father. She currently owes $120,000 on her personal residence and $120,000 on business property. National Bank holds the mortgages on both properties and has agreed to accept $100,000 in complete satisfaction of either mortgage. The interest rate on the mortgages is 8%, and both mortgages are payable over 10 years. What would be the tax consequences of each of the following alternatives assuming Fran currently deducts the mortgages interest on her tax return? a). Retire the mortgage on the residence b). Retire the mortgage on the business property Which choice should Fran choose?

Reference no: EM13886652

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