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property. See Trans v. Commissioner, T.C. Memo. 1999-233; Uslu v.
Commissioner, T.C. Memo. 1997-551; Conroy v. Commissioner, T.C.
Memo. 1958-6.
In the case at bar, petitioners each claimed a deduction for
50 percent of the mortgage interest incurred on the Foster City
residence in 1995 and 1996. Respondent disallowed the entire
mortgage interest deductions claimed by both petitioners in 1995
and disallowed Gabriel’s deduction for all but 5 percent of the
mortgage interest paid on the property in 1996 on the basis that
petitioners have not established: (1) The interest associated
with the indebtedness on the property was qualified residence
interest; (2) they had a legal or equitable interest in the
property in 1995; (3) the indebtedness on the property was theirs;
and (4) they personally paid the interest.
Although petitioners offered no direct testimony that Bank of
American loan No. 4540719 was acquisition indebtedness and that
the total indebtedness at issue did not exceed the fair market
value of the Foster City residence, we are satisfied the record
sufficiently establishes that the interest paid on these loans
constitutes qualified residence interest.
During 1995 petitioners had no legal obligation to make
mortgage payments on the Foster City residence, nor did they hold
legal title to the residence. Mahmoud and Fuad were the legal
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