Question

We just completed stage one of an IRS audit on a rather large property in the Northeast. One issue in the audit was the amount of mortgage interest that we claim on this client’s home-office deduction.

The client has a $4 million mortgage on the home. Based on square footage, the home-office part of the mortgage is $1.52 million (38 percent).

The IRS agent cited IRC Section 163(h) and reduced the allowable deduction to interest on $190,000 (38 percent of $500,000). Big ... Log in to view full article.