Thursday, August 4, 2016

Mortage Indebtedness - Unmarried Owning Same Property

Typically, there is a limitation on mortgage interest deduction if the mortgage indebtedness is more than $1,000,000 of acquisition indebtedness plus $100,000 of home equity indebtedness under IRC 163(h)(2)(D). In Voss v. Commissioner, 796 F.3d 1051 (9th Cir. 2015), two unmarried individuals jointly held a property where the limitations would typically apply if they were married. The combined acquisition indebtedness was in excess of $2.2 million. The IRS had disallowed portions of the mortgage interest on each return.


The court ruled that the mortgage indebtedness limitations apply on a per person basis, not on a per residence basis, thus allowing the extra mortgage interest for the taxpayers.


The IRS released AOD 2016-02 stating they will follow this analysis by the court.


Relevant Cites: AOD 2016-02

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