I have an old hotmail account that I don't use anymore. Just out of curiosity, I logged in a few months ago (way past the 4-months thing), and it was still there! It was "deactivated", but it still exists, waiting for you to log back in again. I really wish there was a way to permanently delete a hotmail account.
After not logging in for 30 days, your account becomes inactive. 90 days after that, if you still have not logged in, the account is permantantly deleted.
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Cheers
adam