Matthew Purchases a New Principal Residence in the Current Year

question 96

Multiple Choice

Matthew purchases a new principal residence in the current year and pays points of $2,000 to obtain a mortgage loan. What is the proper tax treatment for the points paid?

• A)The points are a nondeductible personal expense.
• B)The points must be amortized over the life of the loan.
• C)The points are fully deductible in the current year.
• D)The points must be capitalized into the cost of the residence.
• E)The points must be amortized over 5 years.

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Definitions:

2-Pentanone

A five-carbon ketone with the formula CH3COCH2CH2CH3, used as a solvent in various industrial applications.

Thionyl Chloride

A reagent used in organic synthesis for transforming carboxylic acids into acyl chlorides or converting alcohols into alkyl chlorides.

2-Phenylethanol

An organic compound with a floral scent, commonly used in perfumery and flavoring, representing an alcohol with a phenyl group attached to the second carbon.

Toluene

Toluene is a colorless, water-insoluble liquid hydrocarbon of the aromatic series, used in the manufacture of various chemicals.