Revenue Ruling 71-268

IRS Headnote

A husband and wife may deduct on separate returns only the amount of
property tax and interest actually paid by each on mortgaged property held
as tenants by the entirety; G.C.M. 15530 superseded.

Full Text

H and W, husband and wife, held their personal residence as tenants by the
entirety. The property was encumbered with an indebtedness evidenced by a
promissory note and secured by a mortgage. The promissory note signed by H
and W, as joint and several makers, required them to pay the principal,
interest, state real property taxes, and insurance to the mortgagee in
monthly installments over a period of years. The schedule of payments given
to H and W by the mortgagee showed separately the amount of each of these
elements comprising each payment. The mortgagee remitted the real property
taxes for H and W to the appropriate taxing authorities.

During 1969, W made five such installment payments, and H made seven such
payments. H and W filed separate Federal individual income tax returns for
the calendar year 1969, and both taxpayers used the cash receipts and
disbursements method of accounting and itemized their deductions.

Held, since H and W are liable jointly and severally for payment of the
interest on the indebtedness on the property they hold as tenants by the
entirety, the amount of interest actually paid by W during 1969 is
deductible on her separate tax return for 1969, and the amount of interest
actually paid by H during 1969 is deductible on his separate tax return for
1969, pursuant to section 163 of the Internal Revenue Code of 1954.

Held further, inasmuch as H and W are jointly liable for the real property
taxes charged against the property they hold as tenants by the entirety,
the amount of such taxes actually paid by W and remitted by the mortgagee
to the appropriate taxing authorities during 1969 is deductible on her
separate tax return for 1969, and the amount of such taxes actually paid by
H and remitted by the mortgagee to the appropriate taxing authorities
during 1969 is deductible on his separate tax return for 1969, pursuant to
section 164 of the Code.

G.C.M. 15530, C.B. XIV-2, 107 (1935), is hereby superseded, since the
position stated therein is set forth under the current statute and
regulations in this Revenue Ruling.

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