Andrew E. Blanche, Jr., and Cynthia D. Blanche - Page 10

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          indebtedness.  Section 163(h)(1), however, provides that, in the            
          case of a taxpayer other than a corporation, no deduction shall             
          be allowed for personal interest paid or accrued during the                 
          taxable year.  Section 163(h)(2) defines "personal interest" to             
          mean any interest allowable as a deduction other than, inter                
          alia, "any qualified residence interest".  Sec. 163(h)(2)(D).               
          Thus, qualified residence interest is deductible under section              
          163(a).  The term "qualified residence interest" is defined, in             
          pertinent part, in section 163(h)(3)(A)(i), as any interest paid            
          or accrued during the taxable year on "acquisition indebtedness             
          with respect to any qualified residence of the taxpayer".                   
               The "indebtedness" for purposes of section 163 must, in                
          general, be an obligation of the taxpayer and not an obligation             
          of another.  Golder v. Commissioner, 604 F.2d 34, 35 (9th Cir.              
          1979), affg. T.C. Memo. 1976-150; Smith v. Commissioner, 84 T.C.            
          889, 897 (1985), affd. without published opinion 805 F.2d 1073              
          (D.C. Cir. 1986); Hynes v. Commissioner, 74 T.C. 1266, 1287                 
          (1980).  However, section 1.163-1(b), Income Tax Regs., provides,           
          in pertinent part:                                                          

               Interest paid by the taxpayer on a mortgage upon real estate           
               of which he is the legal or equitable owner, even though the           
               taxpayer is not directly liable upon the bond or note                  
               secured by such mortgage, may be deducted as interest on his           
               indebtedness. * * *                                                    

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