Andrew E. Blanche, Jr., and Cynthia D. Blanche - Page 13

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          income tax benefits of mortgage interest payments do not flow               
          through to petitioners from the Hewitts.  The only taxpayer                 
          entitled to a mortgage interest deduction on the Foxbriar                   
          property for 1991 is the taxpayer who actually paid the interest            
          as the debtor to Lomas Mortgage.  Petitioners were not the                  
          debtors during 1991 and did not pay the interest during that                
          year.  A similar analysis applies to the deduction of real estate           
          taxes for 1991.  See discussion, infra.                                     
               For 1992, petitioners claimed a deduction for all of the               
          mortgage interest paid on the Foxbriar property during that year.           
          However, through at least April 1992, petitioners paid only                 
          $1,000 in monthly rent to Mrs. Hewitt.  As discussed previously,            
          petitioners are not entitled to mortgage interest deductions (or            
          real property tax deductions) in connection with these lease                
          payments because they did not actually pay any mortgage interest            
          (or real property taxes) through at least May 1992.                         
               Sometime after May 1992, petitioners paid $7,269.73 to Lomas           
          Mortgage to cure the mortgage default.  However, if a taxpayer              
          pays mortgage interest that accrued prior to the date upon which            
          the taxpayer becomes the legal or equitable owner of the subject            
          property, that amount is not currently deductible.  See Koehler             
          v. Commissioner, T.C. Memo. 1978-381.  Moreover, it is notable              
          that the District Court awarded petitioners restitution for                 
          amounts paid to cure the mortgage default in 1992.                          

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