Mortgage interest deduction on more than one residence

The publications are updated according to tax court decisions, especially big ones like this. So while it is theoretically correct that the publication is wrong, practically it is not. ==============Maybe so, but an IRS publication is not a citable authority. A Tax Court decision is.

The IRS never updated the contributions publication to say that out-of-pocket expenses taken as contributions need to have an acknowledgment from the charity if they exceed $250 for the YEAR (not separately) yet there is a published Tax Court decision that says exactly that too.

If the IRS were always correct, we wouldn't need the Tax Court. In other words, I don't care what the IRS says with regard to any matter to which the Tax Court has spoken.

You have completely misinterpreted the court's decision. All they said was that Congress did not carve out an exception for unmarried co-owners. The law is the same for them as it is for a married couple. The limit is $1.1m on two homes.

When the court concludes with this:

"Although we have reached our conclusion by reviewing the language of the statute, nothing in the legislative history of the section 163(h)(3) indebtedness limitations suggests that Congress had any other intention than what we have determined from an examination of the language. We conclude that the limitations in section 163(h)(3)(B)(ii) and (C)(ii) on the amounts that may be treated as acquisition and home equity indebtedness with respect to a qualified residence are properly applied on a per-residence basis."

============You were doing fine up to there. ============ They are saying that for this case, where there were TWO RESIDENCES, the allocation by the IRS per residence that limited the total to $1.1M was proper. They did not say that if you owned two residences, the total allowed changes to $2.2M. ============ NOT AT ALL. What it said is where there are TWO OWNERS, they must allocate the interest on that residence's $1.1M of qualifying debt between them.

The Court made no finding as to any other qualified residence owned by either taxpayer. There was only one residence under question.

It's possible that both the per property and per taxpayer limits apply. Per property means that on one property the maximum you can deduct is $1.1M across one or more taxpayers. But the maximum of $1.1M per taxpayer across all their properties. I think the court decision is capricious (and wrong) because they wanted to arbitrarily deny tax benefits, and that's why they used contorted logic and that's why it is so hard to understand.

============I agree that the Court's decision could be wrong, but that requires that a party appeal the decision. No appeal has been filed and the time to do so has expired.

However, Judge Cohen: ?From Congress? use of ?any indebtedness? in the definition of acquisition indebtedness, which is not qualified by language regarding an individual taxpayer, it appears that this phrase refers to the total amount of indebtedness with respect to a qualified residence and which is secured by that residence. The focus is on the entire amount of indebtedness with respect to the residence itself. Thus when the statute limits the amount that may be treated as acquisition indebtedness, it appears that what is being limited is the total amount of acquisition debt that may be claimed in relation to the qualified residence, rather than the amount of acquisition debt that may be claimed in relation to an individual taxpayer.? 138 T. C. 8, at p. 12.

"We conclude that the limitations in section 163(h)(3)(B)(ii) and (C)(ii) on the amounts that may be treated as acquisition and home equity indebtedness with respect to a qualified residence are properly applied on a per-residence basis.? 138 T.C. 8, at p. 16.

That makes it absolutely clear: The limit is per residence, not per taxpayer. As a taxpayer can have (at most) TWO qualified residences, the conclusion that $2.2M of qualified debt per taxpayer may exist is proper (except for married-filing-separate taxpayers who may only claim one-half).

au contrair: what is the definition of "qualified residence"? Key word below is AND.

(4) Other definitions and special rules For purposes of this subsection- (A) Qualified residence (i) In general The term "qualified residence" means- (I) the principal residence (within the meaning of section 121) of the taxpayer, *****and***** (II) 1 other residence of the taxpayer which is selected by the taxpayer for purposes of this subsection for the taxable year and which is used by the taxpayer as a residence (within the meaning of section 280A (d)(1)).

wrong. there were two residences, two loans.

I don't recall you quoting anything.

wrong. Two residences under question:

"In 2006 Sophy paid mortgage interest of $94,698 for the two residences, and Voss paid $85,962. The total average balance in 2006 for the Beverly Hills house mortgage and home equity loan and the Rancho Mirage house mortgage was $2,703,568. In 2007 Sophy paid mortgage interest of $99,901, and Voss paid $76,635. The total average balance in 2007 for the two mortgages and the home equity loan was $2,669,136."

You seem to have forgotten the definition of a qualified residence. Fron another case dated later than Sophy:

For 2005, 2006, and 2007 petitioner claimed home mortgage interest deductions for the Highpoint Drive property. Petitioner could properly claim a home mortgage interest deduction if he paid or accrued interest on indebtedness with respect to a qualified residence. See sec.

163(h)(3)(A). A ?qualified residence? is defined as the taxpayer?s principal residence, within the meaning of section 121, and one other residence that the taxpayer used as a residence during the taxable year. See sec. 163(h)(4)(A)(i)(I) and (II).

The term "qualified residence" includes up to two residences.

As opposed to one person being able to have two qualified residences. That makes sense.

That "and" could be an inclusive or an exclusive "and." It's not clear from the context which it is. And after a brief search of the regulations as well as the cases, I was not able to find a single mention of this point or this issue. So it's still up in the air.

You seem to have forgotten the definition of a qualified residence. Fron another case dated later than Sophy:

For 2005, 2006, and 2007 petitioner claimed home mortgage interest deductions for the Highpoint Drive property. Petitioner could properly claim a home mortgage interest deduction if he paid or accrued interest on indebtedness with respect to a qualified residence. See sec.

163(h)(3)(A). A ?qualified residence? is defined as the taxpayer?s principal residence, within the meaning of section 121, and one other residence that the taxpayer used as a residence during the taxable year. See sec. 163(h)(4)(A)(i)(I) and (II).

The term "qualified residence" includes up to two residences. ==============Yes, TWO, with EACH SEPARATELY having the limit.

The word "any" in the phrase "any qualified residence" would be superfluous if there were collectively only one as you suggest. Look at TR 1.163-10T. If the term were a collective as you say, then why does the regulation contain the phrase "TWO qualified residences" (emphasis added by me) at subsection (o)(5)(iii)? It is clear that Treasury thinks a taxpayer can have two, and with this TC ruling, if the limit is per-residence, then a taxpayer (not filing MFS) can have a maximum qualified debt of $2.2M ($1.1M from each of a maximum of two qualified residences).

This decision is on appeal. I must say I agree with the arguments for overturning this decision. See the appeal brief at

This decision is on appeal. I must say I agree with the arguments for overturning this decision. See the appeal brief at

=============== Interesting. I guess I didn't have the correct terms to uncover this when I searched to see if an appeal was filed.

Note the last of four arguments of error on pages 9-10, starting with "finally" is the conclusion that I drew from the TC decision (yet the Court's rule 155 computation of such was incorrect).

I still say that everyone who has two properties with more than $1.1M of aggregate debt should submit a computation for this year (and protective claims for tax years 2009-11) based on the TC ruling as it currently stands. It hasn't been reversed yet.... The IRS argued the per-residence limit, so let them be stuck with it.

That temporary regulation was written before amendments were made to 163. I couldn't find the test of 163 in effect when the temporary regulation was written.