- 20 - (1940). Payments for a lender's services in connection with a loan are generally capital expenditures and must be amortized over the life of the loan. Goodwin v. Commissioner, 75 T.C. 424, 440-441 (1980), affd. without published opinion 691 F.2d 490 (3d Cir. 1982). Points are amounts paid by a borrower for loan processing. Cao v. Commissioner, T.C. Memo. 1994-60, affd. without published opinion ___ F.3d. ___ (9th Cir., Feb. 29, 1996). Fees paid for loan processing can be for the use or forbearance of money or for a lender's services. Id. Points paid for the use or forbearance of money are deductible as prepaid interest. Id. A cash basis taxpayer must generally amortize prepaid interest over the life of the loan. Sec. 461(g)(1). However, points are immediately deductible if they are paid for indebtedness incurred in connection with the purchase or improvement of the taxpayer's principal residence and the loan is secured by the home. Sec. 461(g)(2). Petitioners deducted $4,457.50 for points on their 1992 return. Mr. Frank testified that this amount includes $1,980 from refinancing their Whitecliff Drive residence, $250 from a line of equity on Whitecliff Drive, and $2,227.50 from buying their new residence at Luann Court. Petitioners lost the records for all three transactions. They did not contact the bank to get the relevant documents or otherwise try to reconstruct thePage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
Last modified: May 25, 2011