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Claimed Mortgage Loan Interest Deductions
Relating to the Personal Residence
Although petitioners did not claim any mortgage loan inter-
est deductions with respect to the personal residence in their
1994 return, they contend here that they are entitled to such
deductions. That is because, according to petitioners, petition-
ers purchased, and did not lease, the personal residence, and the
payments that they made during the first nine months of 1994 to
the Hubers were mortgage loan payments consisting entirely of
interest. Respondent counters that petitioners were leasing the
personal residence during 1994 and that the payments which they
made to the Hubers during that year constitute rental income. On
the record before us, we agree with respondent. We find the
agreement entitled "Lease with Option to Purchase" into which the
Hubers as lessors and petitioners as lessees entered to be an
agreement under which the Hubers agreed to lease to petitioners,
and petitioners agreed to pay the Hubers monthly rent of $2,200
for, the personal residence. Although that agreement also
granted petitioners the option to purchase the leased personal
residence, there is no reliable evidence in the record establish-
ing that petitioners exercised that option.
Based on our examination of the entire record in this case,
we find that petitioners have failed to show that they are
entitled to the mortgage loan interest deductions that they are
claiming for 1994 with respect to the personal residence.
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