A small office building is purchased of $1,200,000 with a balloon mortgage that is due at the end of year 10. Payments are based on a 25 year amortization period. If one point was charged, what annual amount can be deducted for tax purposes?

Question

Quizplus · Accepted Answer

Points paid on a mortgage for a property used for business or investment purposes must be amortized over the life of the loan. Since the loan is due in 10 years, the point ($12,000) is amortized over 10 years, resulting in an annual deduction of $1,200.

A Small Office Building Is Purchased of $1,200,000 with a Balloon