Question - What are Rex and Darcie tax treatment as cash basis taxpayers. Rex and Darcie purchased their principal residence on July 1, 1996, taking out an interest-only 30-year $300,000 mortgage. In early 2018, they decided it was time to refinance to take advantage of lower interest rates. Their lender encouraged them to take out a larger mortgage than was needed to pay off the old one, since the rate is so low and their home has doubled in value since they bought it. They signed the new $600,000 15-year fixed rate mortgage on March 14. They used $200,000 of the excess proceeds of $300,000 to remodel the house and spent the other $100,000 on a nice vacation.