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Section 163(h) restricts home mortgage interest deductions
to interest paid on $1 million of acquisition indebtedness for
debt incurred after October 13, 1987. Acquisition indebtedness
is defined as that which is "incurred in acquiring, constructing,
or substantially improving any qualified residence of the
taxpayer, and * * * is secured by such residence." Sec.
163(h)(3)(B). A taxpayer may be entitled to a greater deduction
if he has incurred home equity indebtedness up to $100,000, as
allowed by section 163(h)(3)(C)(ii). There can be no additional
deduction where taxpayers fail to show that they had home equity
indebtedness. See Notice 88-74, 1988-2 C.B. 385. Home equity
indebtedness is defined as "any indebtedness (other than
acquisition indebtedness) secured by a qualified residence".
Sec. 163(h)(3)(C) (emphasis added).
Petitioners, who purchased their home in 1989, did not
demonstrate that any of their debt was not incurred in acquiring,
constructing or substantially improving their residence and thus
have failed to carry their burden of proof. We therefore sustain
respondent's determination as to the amount petitioners may
properly deduct for home mortgage interest.
To reflect the foregoing and issues previously resolved,
Decision will be entered
under Rule 155.
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