Yesterday's Lourdes v. IRS, T.C. Memo 2014-224 was a second denial of this taxpayer's attempt to deduct the home mortgage interest payments she made on behalf of her brother. Although Code Sec. 163 allows the legal or equitable owner to take a deduction for mortgage interest payments, the taxpayer must carry her burden of showing equitable ownership under state law. The taxpayer failed to do so under California law in this case. That law would have required overcoming a presumption that the person on the deed is the 100% legal owner by "showing that there exists an agreement or understanding between the parties evidencing an intent contrary to that which is reflected in the deed. In re Marriage of Fossum, 121 Cal. Rptr. 3d 195, 202 (Ct. App. 2011)." Unfortunately, the taxpayer needs to show more than just having paid for the house, which was her only evidence of ownership in this case.
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