On March 1, Roxanne acquires a house for $160,000. She pays $20,000 down and borrows the remaining $140,000 by obtaining a 15-year mortgage. Roxanne pays $3,500 in closing costs and $2,500 in points in purchasing the house. During the year, she pays $10,300 of interest on her mortgage.
a. What is her allowable interest deduction for the year?
b. How would your answer to part a change if Roxanne already owned the house and the points paid on March 1 were for a 15-year mortgage to refinance her existing mortgage?