Purchase-money mortgages: the Service clarifies the deductibility and reporting of points

Article Abstract:

The IRS issued a revenue procedure that creates a safe harbor by clarifying the deductibility of mortgage points paid by a cash-basis taxpayer. The requirements are: the amounts must be clearly designated on the settlement, they must be a percentage of the mortgage principal, charging them must be an established business practice, the loan must be for a principal residence and the taxpayer must directly pay the amounts. Cases where the points are not deductible are also included such as home improvement loans, points greater than the debt or $1 million, second or vacation home loans or refinancing.

Mortgages

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Expenses related to tax-exempt income: interest and property tax deductions disallowed for civilian government employees receiving living quarters allowance

Article Abstract:

Civilian employees of the federal government who receive living quarters allowances cannot make tax deductions for interest and property tax expenditures, according to the decision in Induni v. Commissioner. Military employees and ministers may make deductions under the Tax Reform Acts of 1984 and 1986. The Tax Court and Second Circuit refused deductions for a member of the Immigration and Naturalization Service, referring to no mention of other federal employees in the two tax acts.

Public employees, Government employees

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Land development costs must be capitalized even though land not actually improved

Article Abstract:

The Tax Court ruling in Von-Lusk v. Commissioner agreed with the IRS that the taxpayer's expenses were incurred in the process of a real estate development and should be capitalized even though the land has never been developed. The Court was apply the uniform capitalization rules of IRC section 263A to management and consultant expenses for a residential development that never received needed approvals. The only expenses found currently deductible were interest expenses.

United States, Laws, regulations and rules, Real estate development, Expense deductions

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