On January 1 of year 1, Arthur and Aretha Franklin purchased a home for $2.10 million by paying $300,000 down and borrowing the remaining $1.80 million with a 5.8 percent loan secured by the home. The Franklins paid interest only on the loan for year 1, year 2, and year 3 (unless stated otherwise).


Note: Enter your answers in dollars and not in millions of dollars. Do not round intermediate calculations. Leave no answer blank. Enter zero if applicable.


Required:


What is the amount of interest expense the Franklins may deduct in year 3 assuming year 1 is 2017?


What is the amount of interest expense the Franklins may deduct in year 2 assuming year 1 is 2021?


Assume that year 1 is 2022 and that in year 2, the Franklins pay off the entire loan, but at the beginning of year 3, they borrow $350,000 secured by the home at a 6 percent rate. They make interest-only payments on the loan during the year, and they e the loan proceeds for purposes unrelated to the home. What amount of interest expense may the Franklins deduct in year 3 on this loan?