Schedule E Interest?

[PaulF]

I have a client who used $80,000 from his business line of credit (thankfully there is no balance from the business at this time) as a downpayment on a residential rental dwelling. Can the interest paid from this downpayment be written off on Schedule E with the mortgage interest, or would it be limited to reporting on Form 4952 and Schedule A Line 13?

[solomon]

Tracing

Believe tracing rules would apply. He would have 30 days before or after the loan proceeds were received to use the funds for Sch E. Only first or second home loans would not have to be traced.