Do understand now, that since you acquired the loan 5-6 days before the in-service date, about 80% (give or take) of the interest paid in 2018 will be allocated to the SCH A. That's the way it works, and that's the way it's supposed to work. From my testing with my figures, if it's not spot on, then it will be close enough so as not to raise any flags with the IRS. I'm still bothered that you're not asked for a loan origination date though, and I am questioning this with the moderators.
From what I understand in IRS Publications 527 and 936, regardless of when you paid the interest during the tax year,(before or after conversion) it's prorated between the SCH A for the period of time it was personal use, and SCH E for the period of time it was business use. While the pubs do cover a refinance, they don't talk anything specific about your specific situation where you owned the property free and clear already, and "then" took out a mortgage, and "then" converted it to business use. So per the IRS Pubs, it would appear a prorating between SCH E and SCH A would be figured on the entire 12 months of the tax year. But my changing the business use percentage to 100%, it seems apparent to me that 3/12 of your total interest payments for 2018 (possibly a little bit more than that) are correctly being allocated to the SCH E.
