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Discussion:Interest Tracing Question
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Jdugancpa (talk|edits) said:
| 25 August 2006
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| Taxpayer buys rental house through foreclosure, pays cash from personal savings, then obtains mortage secured by the property 6 to 7 week later. Proceeds of the mortage go to repaying savings. Will the interest on the mortgage be "traceable" to the rental house? Is there a time frame that must be met for the tracing rules to follow the loan to the rental prop? I took a quick look at the regs but did not see it. (Must admit I did not read them thoroughly).
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JR1 (talk|edits) said:
| August 25, 2006
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| Without reading those, surely it would qualify?
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Michaelstar (talk|edits) said:
| 25 August 2006
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| I agree as well. 6-7 weeks is a reasonable time after purchsing the property to have secured the financing on the property as you have described for this debt to apply under the interest tracing rules and the interest expense to be deductible against the property. I have not seen "reasonable" defined anyplace but this subject has been discussed at various times here in the past and no definition has been been sited in the code or regs.
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Riley2 (talk|edits) said:
| 25 August 2006
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| Quoting directly from Notice 89-35, “In the case of debt proceeds deposited in an account, taxpayers may treat any expenditure made from any account of the taxpayer, or from cash, within 30 days before or 30 days after debt proceeds are deposited in any account of the taxpayer as made from such proceeds to the extent thereof”.
Don’t think that 6 or 7 weeks is under 30-days.
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Michaelstar (talk|edits) said:
| 25 August 2006
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| I concur with Riley2 on this. Notice 89-35 is clear on this issue. The 30 day rule in Notice 89-35 was a modification to the 15 day rule of reg sec 1.163-8T(c)(4).
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Jdugancpa (talk|edits) said:
| 25 August 2006
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| Thank you, Riley. That is not what I wanted to hear, but is what I was looking for. - Jim
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