Matthew Purchases a New Principal Residence in 2014 and Pays

question 60

Multiple Choice

Matthew purchases a new principal residence in 2014 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 2014.
• 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:

Predicted Amount

The value estimated based on a statistical model or analysis.

Sales

The exchange of a commodity or service for money; the action of selling something.

Least Squares Regression

A statistical method for estimating the relationship between variables by minimizing the squares of the differences between observed and predicted values.

Relationship

A connection, association, or involvement between two or more variables or entities.