but a close look at the legal gibberish at that tax reg specifically carve out residential mortgage interest, i.e. the tracing rules do not apply.
look at the Part I rules in publication 936. unless the secured debt is used to purchase or improve THAT property, it's NOT deductible. for example, you can't borrow money against your primary home and use it to purchase a 2nd home and expect to deduct the interest.
