Refinancing: "lender contribution"

Sorry for wearying you with yet another question about tax consequences of refinancing, but I'm very grateful for the answers I get from this group.

The lender's latest plan, which makes sense given when I plan to sell, is to offer me an above-market interest rate (though still less than I'm paying now) and absorb all the closing costs, about $3500, via a "lender contribution". The closing costs include things like mortgage tax and title search that involve real outlays by the bank, as well as fake charges like "processing fee" and "underwriting fee".

As I understand things, there are no income-tax consequences of that contribution when I take out the mortgage, since the closing costs would not have been deductible anyway. Is that correct?

And will that lender contribution have any impact on my basis when I sell the house?

Many thanks!

Reply to
Stan Brown
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I'd like to know the answer, myself. One could make a case for Stan's approach (ignore the "lender contribution"), or one could make a case for the "lender contribution" being taxable when actually paid, not just an adjustment to basis. If the lender contribution is considered attached to the new mortgage, it may be taxable; if attached to the later sale, it certainly isn't taxable.

-- Arthur L. Rubin, CRTP, AFSP

Reply to
Arthur Rubin

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