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property and the performance by petitioners of all of the
obligations under the Alisal property mortgage are sufficient to
render petitioners' obligation to pay off the mortgage, an
enforceable debt, to Haluk and Aysun for the amount of the
mortgage at the interest rate specified in the mortgage. See
Amundson v. Commissioner, T.C. Memo. 1990-337; Belden v.
Commissioner, T.C. Memo. 1995-360. On this record, the Court
finds that the mortgage payments made by petitioners to Southern
California Federal with respect to the Alisal property were, in
effect, payments of principal and interest to Haluk and Aysun.
See id. In other words, the payments by petitioners constituted
payments on an indebtedness of petitioners.
To be sure, as required by section 1.163-1(b), Income Tax
Regs., the taxpayer must be the "legal or equitable owner" of the
property. Where the taxpayer has not established legal,
equitable, or beneficial ownership of mortgaged property, this
Court has disallowed the taxpayer a deduction for the mortgage
interest. See Bonkowski v. Commissioner, T.C. Memo. 1970-340,
affd. 458 F.2d 709 (7th Cir. 1972); Song v. Commissioner, supra.
Legal title to the Alisal property was held in the names of
Haluk and Aysun during 1992. Nevertheless, since the time of the
purchase of the Alisal property, petitioners have made each and
every mortgage payment on the property and have paid all expenses
for repairs, maintenance, and improvement in connection with such
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