Tuesday, March 6, 2012
The Tax Court yesterday agreed with the IRS that the § 163(h)(3) limitations on the deductibility of mortgage interest are applied on a per-residence basis (and thus limited to $1.1 of mortgage debt ($1 million of acquisition indebtedness plus $100,000 of home equity indebtedness)), rather than on a per-taxpayer basis ($2.2 of mortgage debt), as contended by celebrity psychiatrist Charles Sophy and his domestic partner who owned homes in Beverly Hills and Rancho Mirage, California, as joint tenants. Voss v. Commissioner, 138 T.C. No. 8 (Mar. 5, 2012).
Update: Forbes, In Loss For Gay Couples, Celebrity Shrink Gets Mortgage Deduction Shrunk, by Janet Novack:
A U.S. Tax Court judge ruled today that celebrity psychiatrist Charles J. Sophy and his domestic partner can deduct the interest on only $1.1 million in mortgage debt, combined, for the two houses they own together. The court ruling, the first on the issue, supports a March 2009 IRS Chief Counel Memo that surprised and disappointed accountants for affluent same sex and unmarried couples.
Prior TaxProf Blog coverage:
- IRS Limits Home Mortgage Interest Deduction for Gay/Lesbian Couples (March 23, 2009)
- Martin J. McMahon, Jr. (Florida), In Defense of CCA 200911007 (Mar. 25, 2009)
- Patricia Cain (Santa Clara), In Defense of the Consensus on CCA 200911007 (Mar. 25, 2009)
- Patrica Cain (Santa Clara), Unmarried Couples and the Mortgage Interest Deduction, 123 Tax Notes 473 (Apr. 27, 2009)