- 12 -
the foreclosure of property secured by a nonrecourse loan. The
taxpayer in Harris owned a one-half interest in an apartment
building that he lost in a foreclosure sale. In the months
leading up to the foreclosure the holder of the second trust deed
(the lienholder) had paid the outstanding interest and taxes to
the holder of the first trust deed. The lienholder later
foreclosed on the property. We permitted the taxpayer to deduct
the full amount of interest and taxes paid by the foreclosing
lienholder.10 We similarly hold that petitioner is entitled to
the interest deduction here.
c. Deductible Amount of Qualified Residence Interest
Respondent asserts that petitioner is entitled to no
interest deduction because petitioner has failed to establish the
amount of accrued interest as of the foreclosure date. While
petitioner has introduced no single document reflecting this
amount, it is nevertheless determinable from the record as a
whole.
The “Adjustable Rate Rider” to the Deed of Trust indicates
that the interest rate Wells Fargo charged to petitioner was a
flexible rate with a floor of 6.95 percent and a ceiling of 12.95
10Although Harris v. Commissioner, T.C. Memo. 1975-125,
affd. without published opinion 554 F.2d 1068 (9th Cir. 1977),
was decided prior to Commissioner v. Tufts, 461 U.S. 300 (1983),
Harris applied a similar analysis by including the total amount
of the outstanding nonrecourse indebtedness in the amount
realized by the debtor in the foreclosure.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011