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In July of this year, our Father-in-Law gifted my wife(his daughter) and I immediately prior to his imminent foreclosure. Father in law (FIL) is an alcoholic and refuses to deal with the responsibilities of his bills. This was the second time he allowed his home to go into foreclosure and had not made mortgage payments or submitted taxes in about two years. The first time he went into foreclosure in October 2000, my wife and I and my wife's sister and her husband came up with around $3,000 to reinstate the loan, after which FIL made maybe one payment.

Taking full ownership of the house as a 2nd house, we took out a new loan and paid off existing 1st & 2nd mortgage - including penalty fees and unpaid interest, back IRS taxes, credit card collections, back property taxes, etc. Our new current loan is for $129,000. The house was appraised during the refi for $265k. We took ownership in July and the loan closed in late November.

Overall, as part of paying off the leins on the house, we have paid current and back property taxes, current and back mortgage interest payments. Are those property tax and interest payments deductable?
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