Wait a couple of days

[JG EA]

I should probably wait until after the 17th to bring up this point, but the returns I have on extension all seem to have many points for research and I do better taking one baby step at a time.

Who has experience with client's refinancing and refinancing and has AMT? I brought this up last year - home mortgage interest that has to be subtracted on 6251.

The way I read this worksheet for home mortgage interest in the form instructions is that if the client refinances then he can't take the interest attributable to his closing costs. It says the principal just before the refinancing is compared to the principal after. Well, if the client put the closing costs in the new refi then the principal after is going to be more than the principal before.

Is this how you read it?

This is becoming more and more a problem each year because the client keeps refinancing. Therefore more and more of a percentage of the home mortgage interest goes on the 6251.

[Bees Knees]

I agree

For AMT purposes, you can only count debt used to acquire or substantially improve the property. Nothing else. So if part of the debt was used for other purposes, such as to pay closing costs, then the interest on that part of the debt is not allowed for AMT purposes.

[JG EA]

Yes, I know -

But the problem I'm speaking about is when Buy, Build, Improve dollars are refinanced. Notice the worksheet in the 6251. It compares the principal before the refi with the principal after the refi. If the taxpayer refi's with and the closing costs are included, then that part is also added - as far as I can see.

[Bees Knees]

I agree. The worksheet says "DO NOT include any interest paid on the part of the balance of the new mortgage that exceeded the balance of the eligible mortgage immediately before the refinancing."

So that portion that exceeds the old mortgage is not included in the calculation of deductible interest. The worksheet is designed to subtract out the eligible interest from total interest, so that you only add back the un-eligible interest on Form 6251.

[JG EA]

Thanks,

Thanks for looking at this. I did research last year and the NATP researcher called someone in the making of laws for AMT (or something). He told her and she told me (all very third hand) that they did not intend to address closing costs. But the way I read it that is exactly what they did.

Thank you for giving me your opinion on this - again much appreciated.

JG
PS. In rereading your first post you answered me then and I overlooked it. Thanks also for not using the words: "You idiot" before calmly answering me again.