CCA Departs From Tax Court on Mortgage Debt Exceeding $1 Million

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

 The IRS Office of Chief Counsel says in CCA 200940030 that indebtedness in excess of $1 million incurred to acquire, construct, or substantially improve a qualified residence can constitute home equity indebtedness qualifying for the interest deduction available under Section 163(h)(3)(C).

As such, it says a taxpayer who borrows more than $1 million to buy a principal residence may deduct interest on up to $1.1 million of the loan—$1 million as acquisition indebtedness and $100,000 as home equity indebtedness. The office notes the position it is taking in the CCA is inconsistent with Tax Court rulings in Pau v. Commissioner and Catalano v. Commissioner.

Request Daily Tax Report