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    #1

    Mortgage Interest

    Taxpayer purchased home in 2003 for $398,248 and refi'd in 05 bringing mortgage up to $500,000. The funds were not used for improvements, but rather to live on for the last couple of years. So, in 2009 they turned the residence into a rental. Would the interest now need to be prorated based on only the acquisition debt?
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    #2
    Yes. And since the part that was equity is now not secured by their home it will not be deductible anywhere.
    TTB 4-11
    JG

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