Cathcart (D) got a net proceeds mortgage loan. The face amount was $57,600 with a 7% rate for 29 years. Ds got $55,039.92 in actual proceeds at closing. The $2,560.68 was used to pay for various fees and services and also included a $1,086.60 charge for points against the loan. D argued that these points, as charged, were in fact interest charges against the loan and deducted them in the tax year they were incurred. The IRS claims that D must prorate the points over the life of the loan.

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