John A. Malone and Brenda K. Malone - Page 11

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               2(...continued)                                                        
                         accrued during the taxable year on--                         
                              (i)  acquisition indebtedness with respect to           
                              any qualified residence of the taxpayer, or             
                              (ii) home equity indebtedness with respect to           
                              any qualified residence of the taxpayer.                
                         For purposes of the preceding sentence, the                  
                         determination of whether any property is a                   
                         qualified residence of the taxpayer shall be made            
                         as of the time the interest is accrued.                      
                         (B)  Acquisition indebtedness.--                             
                              (i)  In general.--The term "acquisition                 
                              indebtedness" means any indebtedness which--            
                                   (I)  is incurred in acquiring,                     
                                   constructing, or substantially improving           
                                   any qualified residence of the taxpayer,           
                                   and                                                
                                   (II) is secured by such residence.                 
                                 *  *  *  *  *  *  *                                  
                         (C)  Home equity indebtedness.--                             
                              (i) In general.--The term "home equity                  
                              indebtedness" means any indebtedness (other             
                              than acquisition indebtedness) secured by a             
                              qualified residence to the extent the                   
                              aggregate amount of such indebtedness does              
                              not exceed--                                            
                                   (I)  the fair market value of such                 
                                   qualified residence, reduced by                    
                                   (II) the amount of acquisition                     
                                   indebtedness with respect to such                  
                                   residence.                                         
                              (ii)  Limitation.--The aggregate amount                 
                                                             (continued...)           




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