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security for the loan. Due to extensive repairs needed on the
Alisal property, petitioners and their children were unable to
occupy the property until June 1991.
Nevertheless, petitioners made all the required mortgage
payments to Southern California Federal, with respect to the
Alisal property, from the commencement of the mortgage up until
trial of this case, including the entire year at issue. During
1992, petitioners paid a total of $18,980 to Southern California
Federal as interest on the mortgage of the Alisal property.
Petitioners also paid all repairs, improvements, and maintenance
on the Alisal property since the time of its purchase in 1990.
Up to the date of trial, Haluk and Aysun had never occupied the
Alisal property; they never made any payments on the Alisal
property, either as to mortgage, repairs, maintenance,
improvements, or otherwise, and they never agreed to or ever
intended to spend their money on the property.
On their Federal income tax return for 1992, petitioners
claimed on Schedule A, Itemized Deductions, a deduction of
$18,980 for home mortgage interest, representing the mortgage
interest paid on the Alisal property during 1992. In the notice
of deficiency, respondent disallowed the home mortgage interest
deduction for the reason that "The interest expense you claimed
is not deductible since you are not legally liable for the debt."
Haluk and Aysun did not claim a Federal income tax deduction for
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