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funds. See Finney v. Commissioner, T.C. Memo. 1976-329, and
cases cited therein. This may require that the taxpayer claiming
the deduction produce evidence sufficient to trace the payment
directly to such funds. See id. The record in this case
contains no evidence that petitioner has ever provided to
respondent evidence that would allow a tracing of mortgage
interest payments to deposits of his separate funds into the
account he "shared" with his mother.7
We therefore find that respondents's position on the
mortgage interest deduction was reasonable in fact and in law.
Dependency Exemptions
A taxpayer is allowed as a deduction an exemption amount for
each dependent who is a child of the taxpayer under a certain age
or whose gross income is less than the exemption amount. See
sec. 151(c)(1). A "dependent" includes a niece or a nephew over
half of whose support for the taxable year is received from the
taxpayer. Sec. 152(a). Under section 152(a), the taxpayer bears
7 Petitioner also has not shown that the interest payments
at issue were with respect to home equity indebtedness that did
not exceed the fair market value of the residence reduced by the
acquisition indebtedness. Sec. 163(h)(3)(C)(i). Respondent
cites sec. 1.163-10T(b), (c), and (d), Temporary Income Tax
Regs., 52 Fed. Reg. 48410-48411 (Dec. 22, 1987), for the
proposition that petitioner failed to prove that the loans did
not exceed the adjusted purchase price of the home. But the rule
for equity indebtedness was changed for tax years beginning after
Dec. 31, 1987, by the Omnibus Budget Reconciliation Act of 1987,
Pub. L. 100-203, sec. 10102(a), and 101 Stat. 1330-384, amending
sec. 163(h)(3).
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