On July 1 of the Current Year, Marcia Purchases a Small

question 391

Multiple Choice

On July 1 of the current year, Marcia purchases a small office building to use in her business and borrows $320,000. Marcia is required to pay two points on the loan. The loan is secured by the property and the charging of points is an established business practice in the area. The term of the loan is 20 years, beginning on July 1 of the current year. How much, if any, of the points may Marcia deduct in the current year?

• A) $160
• B) $6,400
• C) $0
• D) $3,200

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Definitions:

Apartment Building

A residential building containing multiple apartments for rent or lease.

Cost Recovery Deduction

A tax deduction that allows taxpayers to recover the cost of an asset over the time the asset is used, typically through depreciation.

Cost Recovery Deduction

A tax deduction that allows a taxpayer to recover the cost of property or assets over time through depreciation.

Warehouse

A large commercial building for storing goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc.