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Home Mortgage Interest
Respondent argues that when the statutory notice was issued
and the answer was filed, petitioner had not established that he
held a legal or equitable ownership interest in the family
residence, a prerequisite to the interest deduction. We agree
with respondent.
A taxpayer other than a corporation may not deduct personal
interest paid or accrued during the taxable year. See sec.
163(h). Interest, however, paid by a taxpayer on a mortgage on
real property of which he is the legal or equitable owner may be
deducted, even if the taxpayer is not directly liable on the note
secured by the mortgage. See sec. 1.163-1(b), Income Tax Regs.
But the deduction is limited to the amount of "qualified
residence interest". See sec. 163(h)(2)(D).
A "qualified residence" is the principal residence of the
taxpayer and one other residence selected by the taxpayer which
is used as a residence by the taxpayer. Sec. 163(h)(5)(A).
"Qualified residence interest" includes interest paid or
accrued on "acquisition indebtedness" or "home equity
indebtedness" with respect to a qualified residence of the
taxpayer. Sec. 163(h)(3)(A).
"Acquisition indebtedness" is indebtedness incurred in
acquiring, constructing, or substantially improving a qualified
residence of the taxpayer that is secured by the residence. It
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Last modified: May 25, 2011