## Facts

- Bruce H. Voss and Charles J. Sophy, unmarried to each other, jointly owned a residence and were jointly liable on the mortgages secured by it.
- For tax years 2006 and 2007, each filed an individual federal income tax return claiming a home mortgage interest deduction under I.R.C. § 163(h)(3).
- Section 163(h)(3) limits deductible “qualified residence interest” to interest on up to $1,000,000 of “acquisition indebtedness” and $100,000 of “home equity indebtedness.”
- After audit, the IRS applied the $1,000,000 and $100,000 caps per residence, treating the co-owners as sharing a single combined $1.1 million debt ceiling and disallowing portions of each taxpayer’s claimed interest deduction.
- The Tax Court agreed with the IRS and held the limitations apply on a per-residence basis.
- Voss and Sophy appealed, arguing the caps apply per taxpayer, allowing each unmarried co-owner to claim interest deductions up to the full statutory limits.

## Issues

1. Whether I.R.C. § 163(h)(3)’s $1,000,000 acquisition-indebtedness limit and $100,000 home-equity-indebtedness limit apply per taxpayer or per residence when two unmarried co-owners claim qualified residence interest deductions.

## Decision

- The Ninth Circuit reversed the Tax Court and remanded for recalculation of the taxpayers’ allowable deductions.
- The court held § 163(h)(3)’s debt-limit provisions apply on a per-taxpayer basis to unmarried co-owners of a qualified residence.
- The panel relied on § 163(h)(3)(B)(ii)’s express special rule reducing the acquisition-indebtedness cap for married individuals filing separately as evidence that, absent such a rule, the default operates per taxpayer.
- The court rejected the IRS’s per-residence interpretation and declined to treat informal agency guidance as controlling where the statute’s text and structure supported the per-taxpayer reading.
- Judge Ikuta dissented, concluding the statute was ambiguous and that the IRS’s per-residence approach was reasonable and should be sustained under administrative-law deference principles.

## Legal Principles

- For unmarried taxpayers who co-own a qualified residence and are obligated on the secured debt, § 163(h)(3)’s acquisition- and home-equity-indebtedness limits apply separately to each taxpayer when computing deductible qualified residence interest.
- A statute’s explicit special rule for a defined group (married individuals filing separately) can indicate that other taxpayers remain subject to the default rule (here, separate per-taxpayer caps).
- Informal agency interpretive positions that are not promulgated as binding regulations may be given limited weight, particularly where statutory text and structure support a contrary interpretation.

## Conclusion

The Ninth Circuit held that the mortgage-interest debt ceilings in I.R.C. § 163(h)(3) apply per taxpayer for unmarried co-owners of a residence, reversed the Tax Court’s per-residence limitation, and remanded for recalculation of each taxpayer’s deductible qualified residence interest using separate statutory caps.


Voss v. Commissioner, 796 F.3d 1051 (9th Cir. 2015)