and see example 4 in this link - tracing does not work
https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest
<< It actually depends upon how the proceeds are used.>>
I think the tracing argument is predicated on where the money came from, not where it is to be used
You get a difference answer if you assume the tracing is predicated on where the funds are used!
so if you cash out refi on a primary home and use it to purchase a rental property, the interest is NOT deductible because the tracing points to where the money came from (the cash out refi where there was no purchase or improvement to the primary home) and not where it was used (the rental property).
thoughts?
