I think what you're saying is equivalent to saying "this is the same interest that the taxpayer would have paid if they had held the loan with a lower average balance for the full year even though that wasn't the actual period the mortgage was held." And while I agree that that's mathematically true, I'm not sure why the IRS would accept that argument for why the mortgage interest shouldn't be limited, when 1) the balance was in fact over $750k at times and 2) it amortizes over months when the taxpayer didn't own the property.
The underlying law says that the limit applies to "any period," so interpreting that as "it's OK to amortize over the full year, including periods of time the taxpayer didn't own the property" seems to me like it wouldn't be consistent with the law. Unless maybe there's guidance from the IRS that indicates this is acceptable? (In which case, if the IRS says it's OK, then that's certainly more authoritative than my amateur reading of the law!)
