Rephrasing my earlier question on Org fees/Points

[AZ-Tax]

My orginal question: Client's 1098 has an amt in box 2 pts pd. Client also has a letter from the same lender who issued 1098 that his orgination fees are this amt which happens to be 3 times higher then box 2. All of this is on the same mortgage to buy his current home. I dont believe I have ever came across one of these. Now add this. The clients first home was converted into a rental April 2011 so this mortgage is on a 2nd home but is it really a 2nd home if the first one is a rental? TTB 4-12 top left #7) The loan is used to buy or build the taxpayer’s main home (not a second home).

I have concluded after as much research as I can handle, both Org fees and discount point will either be fully deducted in 2011 or amortized the life of the loan. I am back to TTB 4-12 top left (to be fully deductible in TY) " #7) The loan is used to buy or build the taxpayer’s main home (not a second home)". At the time the TP purchased their residence, the TP owned a 2nd home (former residence) that was not coverted to a rental until 60 days after TP's residence purchase. This makes me lean towards amortizing both org fee and discount points to be on the safe side if there is such a side. Your thoughts?

[Gary2]

Why are you focusing on when it became a rental, instead of when it ceased being the taxpayer's primary residence? If they moved in the day after closing, but took 60 days to get the old, vacant house ready for rent, then wouldn't it still be the purchase of a primary residence?

[AZ-Tax]

Maybe reading more into #7 then I should

TTB 4-12 top left (to be fully deductible in TY) " #7) The loan is used to buy or build the taxpayer’s main home (not a second home)".

The above is referring to if the loan proceeds were used for a 2nd home, NOT if he already owned the 2nd home. In my clients case, loan was used for, what eventually became my clients primary residence therefore I believe 2nd home does not apply to #7..

[KathMorgan]

2nd home??

I'm with Gary on this one. The IRS regs are all about intent. Even though the rental home didn't start to rent until 60 days after closing on the new home, I presume, the intent was to convert the old home into a rental. Therefore they never owned "a second home". They owned a primary residence (the new home) and an investment property (the rental home). Based on the info in your OP I would be completely comfortable in deducting the full amount in TY2011 and not amortizing. Just my 2 cents worth.