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Posted by Mr. Travel on January 24, 2008, 8:30 am
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hlunsford@bellsouth.net wrote:
> Brian wrote:
>
>
>>I am having a spirited discussion with one of my colleagues
>>about the deduction for home mortgage interest. I have
>>always believed that in order to deduct mortgage interest it
>>must be paid. He has directed me to IRS Code Section 163
>>which says:
>>
>> Code section 163
>>
>>(A) In general. The term "qualified residence interest"
>>means any interest which is paid OR ACCRUED during the
>>taxable year on—
>>
>>(i) acquisition indebtedness with respect to any qualified
>>residence of the taxpayer, or
>>
>>(ii) home equity indebtedness with respect to any qualified
>>residence of the taxpayer.
>>
>>Obviously, I added the caps for emphasis. If this means what
>>it says, can a taxpayer merely sign a new note each year for
>>the unpaid interest and take a deduction? Or is this a case
>>of, you can take a deduction for accrued interest if you
>>happen to be a cash basis individual?
>
>
> What it means is that if you are a cash basis taxpayer, you
> deduct the interest when paid and if you are an accrual
> basis taxpayer, you deduct it as it accrues.
>
> In all my years of practice I never met an accrual basis
> individual taxpayer. Has anyone?
I don't see where Section 163 states the accrued interest can only be
deducted if you are an accrued based taxpayer?
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