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| Decedent dies and has mortgage interest on property considered 2nd home that was deductible on Sch A of personal 1040 as mortgage interest. Now a portion of this property is funding the marital and bypass trusts. At the trust level would the mortgage interest be suject to the investment interest limitations, or would it be deductible.
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| In this situation I've characterized the interest as investment interest for the marital and/or bypass trust.
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An estate or trust may deduct qualified residence interest paid or accrued on a residence it owns if it establishes that the residence is a qualified residence of a beneficiary who has a present or residuary interest in the trust or estate [IRC Sec. 163(h)(4)(D)].
If nobody lives there it is probably investment interest.
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