- 26 -
163(h)(1), however, provides that, in the case of a taxpayer
other than a corporation, no deduction is allowed for personal
interest. Qualified residence interest is excluded from the
definition of personal interest and thus is deductible under
section 163(a). See sec. 163(h)(2)(D). Qualified residence
interest is any interest which is paid or accrued during the
taxable year on acquisition indebtedness or home equity
indebtedness. See sec. 163(h)(3)(A). Acquisition indebtedness
is any indebtedness secured by the qualified residence of the
taxpayer or incurred in acquiring, constructing, or substantially
improving the qualified residence. See sec. 163(h)(3)(B). Home
equity indebtedness is any other indebtedness secured by the
qualified residence to the extent the aggregate amount of such
indebtedness does not exceed the fair market value of the
qualified residence reduced by the amount of acquisition
indebtedness on the residence. See sec. 163(h)(3)(C)(i). The
amount of home equity indebtedness for any taxable year cannot
exceed $100,000. See sec. 163(h)(3)(C)(ii). The indebtedness
generally must be an obligation of the taxpayer and not an
obligation of another. See Golder v. Commissioner, 604 F.2d 34,
35 (9th Cir. 1979), affg. T.C. Memo. 1976-150.
However, a deduction with respect to interest arising out of
a joint obligation of a taxpayer and another party is only
allowable to the taxpayer to the extent he or she makes payment
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011