Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.2 9/18/84; site decwrl.UUCP Path: utzoo!watmath!clyde!burl!ulysses!mhuxr!mhuxn!ihnp4!ucbvax!decwrl!turano@silver.DEC From: turano@silver.DEC Newsgroups: net.taxes Subject: Re: tax deduction of prepaid mortgage interest Message-ID: <106@decwrl.UUCP> Date: Fri, 23-Aug-85 09:09:02 EDT Article-I.D.: decwrl.106 Posted: Fri Aug 23 09:09:02 1985 Date-Received: Sat, 24-Aug-85 23:53:33 EDT Sender: daemon@decwrl.UUCP Organization: Digital Equipment Corporation Lines: 48 ** With regard to the comments about the deduction of mortgage interest prepaid in December being assignable to the current year: >If you want to deduct the Jan 1 payment this year, pay it on Dec. 30. >...As far as IRS is concerned, it's the date you actually PAID the >interest that counts. I believe this is not correct. Sec. 461(g)(1) of the Internal Revenue Code states: "(g) Prepaid Interest.- (1) In General.- If the taxable income of the taxpayer is computed under a cash receipts and disbursements method of accounting, interest paid by the taxpayer which, under regulations prescribed by the Secretary, is properly allocable to any period- (A) with respect to which the interest represents a charge for the use or forbearance of money, and (B) which is after the close of the taxable year in which paid, shall be charged to capital account and shall be treated as paid in the period to which so allocable. (2) Exception.- " { Deals with points paid and is not important in this discussion.} IRS Publication 17 (Rev. Nov. 84) in section 29, in the third paragraph on page 129 seems to interpret this: "Interest paid in advance. If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it applies. You may deduct in each year only the interest for that year." Together these would seem to imply that the interest payment for January of the following year must be allocated to the following year's deductions. The rationale being that the Congress does not wish individuals to manipulate their tax liability at random. If someone has another reference indicating that the mortgage payment for January for the following year is deductable for the current year, I'd like to see it. I am not a lawyer or an accountant and the above interpretation is strictly an opinion which should not be construed as a fact. Tom Turano