Can You Answer this Reg Question? If Not, Sit for the Reg Now

We mentioned earlier this year that in January 2019, the REG section of the CPA Exam will undergo monumental changes due to the new tax bill signed into law December 22nd, 2017. So, our panel of expert CPAs recommends sitting for the REG section of the CPA Exam in 2018 to avoid the changes.

Below is a sample question that could be asked on the new REG Exam. Are you able to answer the question? 

REG Question:

Beth, a single individual, plans to buy a primary residence on December 1, 2018 for $1.1 million. She will purchase the residence by making a $200,000 down payment and obtaining a mortgage loan to finance the remainder of the purchase price. The taxpayer’s mortgage bears interest at an annual rate of 4%. During 2018, Beth will make only one payment on her mortgage. She will make this payment on December 21, 2018, and her payment will be comprised of interest on the initial loan balance and a $5,000 payment of loan principal. Beth does not have any other outstanding loans. What is Beth’s maximum interest deduction for 2018?

A.  $2,125

B.  $2,500

C.  $3,000

D. $8,000

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