I too am in that group, and in my post #3 I was trying to steer OP to that conclusion while still allowing for the minority position that one has to claim deductions that are allowed.
But then in #4, BucknerCPA asked
In my instance, the main question I have is if one is required to include a second home's average mortgage balance in the total average mortgage balance, or can the second home be disregarded.But then in #s 5 thru 8 it seems we aere dealing with a more nuanced issue, namely, can one elect/select a 2nd residence for 163 purposes but only count the principal residence in the average balance calculation. I said as much in #10.
So where we seem to be is that one can disregard an "actual" 2nd residence (by not electing it as one, per the TCM case interpretation), but that if one elects a second residence treatment under 163, one must be consistent and include its debt in the calculation of average balance.
And with so far only that TCM case as an interpretation, I still have a nagging doubt that 163(h)(4), right there in (A)(i)(II), by using "selected", not "elected", means selected from more than one residence that could be selected as the 2nd residence. And I note that the word elect or a derivative is used 26 times in 163, and the word select or a derivative is used but once. However, I also note that in 1.163-10T(p)(3)(i) we find
That the taxpayer elects to treat as a second residence pursuant to paragraph (p)(3)(iv) of this section.
So I'd say it's by far the more likely correct position that one does not need to elect a second residence, thereby forgoing whatever benefit that might bring in the form of an added interest deduction. What's an example when that reduces the overall tax? Would it just be when secured debt exceeds the $1,000,000 limit allowed under 163 for acquisition debt?