Refinanced after original loan sold, deducting remaining points

Hi, I received some mixed responses over on the unmoderated board; hoping I might be able to get more of a consensus here.

Last year I refinanced my home mortgage with the same company who financed my original loan. I understand that ordinarily this would prohibit me from fully deducting the points remaining on the original loan that year. However, this lender is not the company that owned my loan at the time of the refinance. The first mortgage was sold to another company almost immediately after closing, so I think I have a good argument for deducting all of the remaining points attached to the original loan.

The reason I did not fully deduct the points I paid at closing (on the original loan) was because I closed in November, and it wasn't any more than the standard deduction. So I planned to deduct 1/30 of the points paid over the next 30 years. Then, just over a year later, I refinanced...with the same company that originally lent me money for the home, but who no longer held the mortgage note. Generally speaking, after refinancing I could deduct all of the remaining balance of the points paid on the original loan. But I've read in Pub. 936 that this is not possible when the refinancing is done through the same company as the original loan. In this case, I must continue deducting 1/30 of the remaining balance over the 30 years of the new loan. Please correct me if I'm wrong here. I'm trying to figure out whether an exception applies because the mortgage note transfered hands before I refinanced. Basically it should come down to one of two situations, and probably depends on how the tax code is worded...

1) Both new loan and old loan are from same lender, so I can only deduct 1/30 balance each year; or 2) New loan was from a lender who did not hold my mortgage note, so that I can deduct all of the balance in the year of the refinance.

This situation seems fairly common so I suspect that thousands of people are already deducting these points at once, or else have tried and been denied. I'd appreciate any guidance you can offer about this. Alternatively, what is the best way to get a definitive answer from the IRS (and how long does it usually take them to respond)?

Thank you, Pedro

Reply to
Pedro
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I have always interpreted the term "same lender" to mean the lender you are currently paying your mortgage debt.

E.g., You refinance your Citibank acquisition loan with Quick and Cheap Mortgage Co. and pay points that you are amortizing. Quick and Cheap sells your loan to the Nat'l Bank of Nowhere. You are now paying the Nat'l Bank of Nowhere. You go to the Nat'l Bank of Nowhere and refinance your loan. You have refinanced with the same lender and can not deduct the unamortized points.

Reply to
Alan

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