The concern is how do we calculate the average balance for both the mortgages.
There are 2 methods listed and the first 2 (first and last balance divided by 2 / total interest paid by interest rate) cannot be used as the criteria listed for those will not satisfied.
This leaves me with only the third option (Statements provided by your lender).
The question now is do i divide the total of average balance for each month (with 0 for months that i didn't own the home) by 12 or do i divide it by the number of months i owned the home (say 6 for the home i sold and 9 for the new home i bought)?
Obviously, dividing by 12 would be beneficial and put me well under 750K (because it was only for 2 months that my combined mortgage was above the 750K).
But I am not sure how to interpret the IRS rules with this 3rd method.
