Fall Seminar – interest tracing question, 10T election (contradiction)

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Message Board Fall Seminar – interest tracing question, 10T election (contradiction)

This topic contains 2 replies, has 2 voices, and was last updated by Mark Bole 1 week, 3 days ago.

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  • #124355
    Mark Bole
    Participant

    This is a new/old topic for me, triggered by page 9-15 of the Spidell 2018-2019 Update Seminar. I’ve been told about the 10-T election for years, and still don’t understand what is “the debt”. Does that mean a single loan account at one bank? Does it mean every time I write a check against my HELOC (which is a new loan, each time).

    From the book: example of Ada. She refinances $200K acquisition debt on residence with $250K new loan, with $50K cash out used to buy a rental property. You state she can allocate interest expense 80% to Schedule A as qualified home mortgage interest and 20% to Schedule E as rental expense. But in the very next paragraph, you talk about the 10T election and how it is all-or-nothing. So why doesn’t Ada have to follow all or nothing allocation? Either the interest on $50K is home equity debt interest (not deductible under TCJA), or she has to make 10T election to trace $50K to the rental, but then the $200K is no longer qualified home mortgage acquisition, debt because of the election.

    Which is it? They can’t both be right.

  • #124502
    Mike Giangrande
    Participant

    Mark,

    Interest tracing, which can more appropriately be called interest allocation, is slightly different that the 10T election.

    • #124624
      Mark Bole
      Participant

      What is the “slight difference”? The example given for a 10-T election (Abele) is virtually identical to the Ada example.

      If qualified home mortgage interest can be “traced” at anywhere from 0% to 100% to some other activity where it is deductible, even if it would not be deductible on Schedule A, then why would anyone ever need to make a 10-T election?