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Deduction for Mortgage Interest
In general, section 163 allows a deduction for interest paid
or accrued on indebtedness. For taxpayers who are not
corporations, section 163(h)(1) disallows a deduction for
personal interest. Interest paid on a mortgage secured by a
qualified residence, however, is excluded from the definition of
personal interest and is therefore deductible. See sec.
163(h)(2) and (3).
To meet the requirements of section 163, the mortgage must
be the obligation of the taxpayer claiming the deduction, not the
obligation of another. Golder v. Commissioner, 604 F.2d 34, 35
(9th Cir. 1979), affg. T.C. Memo. 1976-150. However, section
1.163-1(b), Income Tax Regs., provides that even if a taxpayer is
not directly liable on a mortgage, the taxpayer may nevertheless
deduct the mortgage interest paid if he or she is the legal or
equitable owner of the property subject to the mortgage. Where
the taxpayer does not establish legal, equitable, or beneficial
ownership of mortgaged property, we have disallowed the deduction
for mortgage interest. See Daya v. Commissioner, T.C. Memo.
2000-360; Song v. Commissioner, T.C. Memo. 1995-446.
Petitioner is not directly liable on the mortgage, as the
mortgage interest statement was directed to his parents alone.
Petitioner acknowledged that he did not have legal title to the
Bronx Boulevard house. Title was in his father’s and Mr.
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Last modified: November 10, 2007