Points
Response to the following problem:
During 2014, Lee borrowed money on two different occasions from the local bank. She took out the first loan on March 1, 2014 to purchase land for a place to graze horses and livestock as an investment activity. Lee paid $33,000 for the land, making a down payment of $6,000 and borrowing $27,000 for 10 years at 9% interest. To obtain a lower interest rate on the loan, she was required to pay two points, totaling $540 (2% × $27,000). In August, 2014, Lee bought a new house that she uses as her main home. Her mortgage was $48,000 at 8% for 20 years. Lee paid the lender one point, or $480 (1% × $48,000) to get a lower interest rate.
a. Determine the amount of points Lee may use as a 2014 interest deduction in connection with the two loans.
b. What happens to any amount of points not deducted in 2014?