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From: kca@iwsam.UUCP (archie)
Newsgroups: net.invest,net.taxes
Subject: Re: Money from refinancing
Message-ID: <44@iwsam.UUCP>
Date: Fri, 10-Oct-86 15:37:55 EDT
Article-I.D.: iwsam.44
Posted: Fri Oct 10 15:37:55 1986
Date-Received: Sat, 11-Oct-86 09:25:24 EDT
Distribution: na
Organization: AT&T Bell Labs, Naperville, IL
Lines: 50
Keywords: IRS (I Retroactivly Steal)
Summary: ? expense of sale
Xref: ucbvax net.invest:266 net.taxes:120

> >Does anyone have ANY information (for this year and beyond) for the
> >following situation:
> >
> >Jack buy a house from Ed for FULL price but they agree that Ed will
> >pay the 3 points that Jack's bank will charge him for the loan.
> >The purpose, of course, is this save Jack some "up front" money.
> >
> >Can Ed write off the points that HE paid Jack's bank as some sort
> >of expense (of selling the house)?

Yes, That's exactly what it is.  It is not an interest deduction to 
Ed, but an expense of the sale that reduced his profit.
> >
> >When Jack sells, should he pay the points of the person HE sells to?

That has nothing to do with the first question.  It should be decided
based on the facts and circumstances of the second sale.

If I were the buyer, I would prefer to see the seller reduce the sale
price of the house by an amount equivalent to the cost of the points.
If the seller pays the points her/himself, they can be deducted (I assume
this is a personal residence) on her/his 1040 in the year they are
paid as an interest expense.
> 
>  The cost of sale goes against the 'basis' of your real estate
>  if it is a residential sale.

This is true for all property sales, not just residential property.

>  At whatever time Ed sold a house
>  & did not buy another same or more expensive house he would
>  either have to take his one time exclusion or ante up taxes
>  on capital gain.

What is the status of the capital gain on a personal residence in the
new tax law?

>   All expenses not deducted
>  (or deductable) on an annual return can be charged against
>  this 'basis' at reckoning time.

This is not true in the case of personal use property. For example,
one can deduct electricity and heat for a commercial property, but
not for one's residence.

>  Commercial & some special situations would allow deductions of
>  all or part over a depreciation schedule or on an annual return.

This must refer to expenses of purchasing a property, not selling it,
because you can only depreciate property while you own it.