Points paid

[natiro]

Surviving spouse inherited home from deceased spouse in 2004. Title was held by deceased spouse and he made all the payments until his death. When client inherited the home, she took out a mortgage in her name to pay off his mortgage and paid points. Form 1098 reports points paid in Box 2. Code section 461(g)(2) actually reads that taxpayer can deduct points in the year of payment for "purchase, etc." Code does not say "acquisition." Residence went into estate before being transfered to surviving spouse.

Question: Can she deduct these points in the year paid or do they have to be amortized? Clearly she didn't purchase the home. However, she did acquire it. And I wouldn't say that she refinanced the original loan since the original loan wasn't in her name and niether was the property.

I'd like to take the deduction because if I can support it. Any thoughts?

Many thanks. (Hopefully there are a few of you out there still preparing returns this weekend!!!)

[Armando Beaujolais]

She didn't take out the mortgage to acquire the home. She acquired the home by means of inheritance.

She didn't take out the loan to pay off "his" mortgage. She took it out to pay off her mortgage, that she had inherited along with the home.

In these situations especially you want to bend if possible to help out the person. I just don't see any way the mortgage could be looked at as buying the house or acquiring the house. Those event occurred outside the context of the new mortgage. The situation is really much more in the realm of refinancing than it is of acquisition.

[natiro]

Thanks

Thanks Armando. Not really the answer I was hoping for but unfortunately is the same conclusion I keep coming to. I especially appreciate your answer on a Saturday!