In 1995, Thomas Jones rented a house from Robert Peterson. In 1996, Peterson granted Jones an option to purchase the house. Under the terms of this option, Jones paid a $5,000 initial option fee and agreed to

pay more rent (rent now equaled what Peterson paid on the mortgage);

pay the property taxes on the house;

repair the roof;

make another option payment of $5,000 before 2002; and

pay off the existing mortgage on the property.

In 2000, both Peterson and Jones deducted the mortgage interest ... Log in to view full article.