Which of the Following Statements Regarding the Tax Deductibility of Points

question 12

Multiple Choice

Which of the following statements regarding the tax deductibility of points related to a home mortgage is correct?

• A) Points paid in the form of prepaid interest on a refinance are deductible over the life of the loan.
• B) Points paid in the form of prepaid interest on an original home loan are deductible over the life of the loan.
• C) Points paid in the form of a loan origination fee on an original home loan are deductible over the life of the loan.
• D) None of these statements is correct.

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Definitions:

Personnel Department

The division of a business that is focused on activities related to employees, including hiring, training, and benefits management.

Cost Allocated

The process of distributing expenses in multiple cost centers or accounts based on certain criteria or methodologies.

Sales Department

A division of a business responsible for all activities related to the sale of the company's products or services, including marketing, sales strategy, and customer interaction.

Direct Method

A cost allocation technique that assigns support department costs directly to producing departments without any intermediate allocation steps.