I used some of the money from a refinance of the mortgage on rental property A to buy rental property B. So based on the tracing rules I need to allocate the mortgage interest between rental property A and rental property B. How should I allocate the principal payments as the mortgage is repaid (to rental property A which the loan is secured to or to rental property B)? I a section in 26 CFR Ch 1 titled "Supplemental ordering rules" which indicates that the order of repayment (when both debts are in the same class in this case rental real estate) is based on the order that the debts were allocated (which in this case would be rental property A since that debt was incurred first) - does this make sense?
