A551 File Memo Assignment 4

A551 File Memo Assignment 4 - Date: February 13, 2009 To:...

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Date: February 13, 2009 To: File From: Christina Kieninger (A551) Re: Treatment of interest expense Facts Client, Mel, is considering buying a condominium for twin daughters to live in while attending college at Northwestern next fall. Condo is selling for $300,000 and she would obtain a loan for $240,000. The client intends to sell the condo when the twins are done with college. Issue Can Mel deduct the mortgage interest expense from the condo mortgage? Analysis Code §163(h) disallows a deduction for personal interest defined as any interest allowable as a deduction under this chapter other than those in 163(h)(2)(A-F). In reading A-F, D allows any qualified residence interest (within the meaning of paragraph 3) as a deduction. Section 163(h)(3) defines qualified residence interest as any interest which is paid or accrued during the taxable year on acquisition indebtedness with respect to any qualified residence of the taxpayer. It further states that determination of whether any property is a qualified residence of the taxpayer shall be made as of the time the interest is accrued. Acquisition indebtedness is defined in Section 163(h)(3)(B) as indebtedness which is incurred in
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This note was uploaded on 06/23/2009 for the course BUPA 551 taught by Professor Susan during the Spring '09 term at IUPUI.

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