Second Home loan interest deduction

A second home was purchased from a related person at fair market in 2005. In Nov 2005, steps were taken to sell the second home, such as signing a listing contract with a real estate agent. The home was not rented during 2005. The home is currently unsold, but listed for sale. Is the home a qualified second home for purposes of deducting interest and property taxes in 2005? The question relates to IRS Pub 936 which contains the following: "Second home not rented out. If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year." Does signing a listing contract result in "hold out for ... resale to others"? Does having 15 or more personal use days change anything? Sorry for late breaking Q.

scott s.

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scott s.
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"scott s." wrote

There is no intent for a second home to be denied the mortgage interest or property tax deduction solely because that property was put on the market. That second home could easily be a former residence or a vacation home. It is intended to not allow a deduction on Schedule A for "investment" property, purchased with the intent to flip it by someone in the "business" of doing so, one house at a time. So yes, personal use is of some import, as are specific facts and circumstances.

-- Paul Thomas, CPA snipped-for-privacy@bellsouth.net

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Paul Thomas, CPA

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