Ok so no "little know codicle" lurking in the deep recesses
of some obscure court case or temp regulation and it doesn't
really matter that they don't have a primary residence then.
Thanks for the info.

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wallace_cpa[at]msn.com wrote:

- quote -

Straight from the IRS FAQ;

I have a mortgage for my primary residence and a second
mortgage for land that I intend to build a home on. Can the
interest be deducted for the second mortgage?

Unless you have begun construction of a home on the bare
land that you can occupy within 24 months, the land would be
considered an investment and the interest you paid on the
second mortgage would not qualify as deductible mortgage
interest. However, it would constitute investment interest
if you itemize your deductions. For more information, refer
to Publication 550, Investment Income and Expenses, chapter
3 and Publication 936, Home Mortgage Interest Deduction.

Further, 936 states;

For you to take a home mortgage interest deduction, your
debt must be secured by a qualified home. This means your
main home or your second home. A home includes a house,
condominium, cooperative, mobile home, house trailer, boat,
or similar property that has sleeping, cooking, and toilet
facilities.

The accountant was partially correct regarding 'intent to
build'. The disqualifier here is the timeframe.

JOE

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

<wallace_cpa[at]msn.com> wrote:

- quote -

Your first inclination is correct. Regardless of their
"intent", this is not mortgage interest. This is not their
primary or secondary residence, I would treat this as
investment property until such a time as their is a
structure constructed on the property that they are actually
living in as their residence.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I had someone come to me this year that has been deducting
interest, as home mortgage interest, on a home building lot
for over 5 years now. When I pointed out to the client that
this is probably investment interest subject to the
investment income limitations, he indicated that his prior
tax accountant found where this was deductible as mortgage
interest. The prior accountant claimed that since this
client did not own a pirmary residence (which is true, they
are currently renting from a parent) then the interest is
home mortgage interest as long as they intend to build.

Has anyone seen such a paragraph in Section 163 or
elsewhere? Thanks in advance for the input.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >