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completely phased out at a modified AGI level of $75,000 for
joint return filers. Sec. 221(b)(2)(B).
Petitioners contend that respondent improperly disallowed
their education loan interest deduction because the “IRS treated
the interest as a new loan and not a loan in the repayment
stage”. We are unsure why petitioners make a distinction between
a new loan and a loan in “repayment stage”, but the distinction
is irrelevant. The limitations of section 221(b), entitled
“Maximum Deduction”, apply to all education loan interest
deductions so long as the education loan is qualified and with
respect to the first 60 months of repayment. Sec. 221(d).
Respondent does not contest that the loan payments were within
the 60-month period.
Petitioners’ next argument is that they are not subject to
any limitation on the education loan interest deduction because
“line 28 of * * * [Schedule A] states that if line 34 is over
$124,500, your deduction is not limited.” Petitioners are
misguided in this assertion. Line 28 refers to the itemized
deduction phaseout amount1 and has no bearing on petitioners’
entitlement to the education loan interest deduction. Section
1 Sec. 68 establishes an overall limitation on itemized
deductions. For 1998, the phaseout begins at adjusted gross
income of $124,500 for joint return filers. Petitioners
correctly assert, and respondent does not contest, that
petitioners are not subject to the sec. 68 limitation on itemized
deductions.
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Last modified: May 25, 2011