@Anonymous a friend of mind asked his CPA and got the following response. But before that I will restate the current situation.
property A: primary residence. loan amt $300k
property B: rental prop. Loan amt $302k
property C: rental prop. Loan amt $298k
proposed situation:
property A: refinance for $900k secured by principal residence only. (The new loan is at much lower interest rate even after zero closing costs.) Use “cashout” portion $600k to pay off the loans for rental property B and rental property C.
question: is the proportional interest of $600k deductible on the schedule E.
CPA opinion: yes, *so long as* loans for property B and property C are paid off directly from Refi escrow of property A. That will establish tracing requirement.
I have not talked to this professional directly.
Do you folks concur?
