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Discussion Forum Index --> Tax Questions --> Loan Fees
Gwh33 (talk|edits) said:
| 21 February 2007
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| Quick question: client has a rental and acquired a line of credit. The loan fees totaled $2,450. I know these fees need to be amortized per Section 163. How long do the the fees get amortized? There is no "life" of the loan. Thanks in advance!
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94nole (talk|edits) said:
| 21 February 2007
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| There is a life of the HELOC. It is very likely 15 years. Check the note.
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Kevinh5 (talk|edits) said:
| 21 February 2007
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| yes, but what did they use the funds for? To improve the rental? To pay off credit cards? To buy a boat?
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Kevinh5 (talk|edits) said:
| 21 February 2007
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| He can't deduct it on his Sch E unless the money was used for the Schedule E. Depending on what the money was/is used for, the answer is going to be different.
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Glmpllc (talk|edits) said:
| 21 February 2007
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| Kevin is absolutely correct. The amortization of the loan fees will follow the deductibility of the interest which is dependent on what the proceeds were used for. Interest tracing applies. See Reg. 1.163-8T.
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DZCPA (talk|edits) said:
| 21 February 2007
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| It is possible there are no proceeds yet and has not spent any of the line yet, Pay the mortgage with the line to protect the writeoff and your personal bills with your other monies.
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Kevinh5 (talk|edits) said:
| 21 February 2007
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| The way I would track it is via a business use % (different each year based on tracing rules) - same as you would for a car or other listed property.
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Glmpllc (talk|edits) said:
| 21 February 2007
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| Kevin, to my knowledge, the debt is characterized by the initial use of the proceeds and retains that character thoughout the life of the debt. Interest is allocated in accordance with the use of those proceeds. There shouldn't be any fluctuation from year to year.
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Chase (talk|edits) said:
| 13 October 2007
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| Client used a home equity line of credit to buy a business. I'm not clear on the amortization period for the closing costs of the transaction. Guidance is appreciated. Since the HELOC was used entirely for business transactions, I'll be making the election to treat as other than home mortgage interest. Sound right?
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