I would view it quite differently .
The deduction would be fine provided the investment , in full had actually been made . In the case of borrowed funds , you have taken the full deduction up front , but you are now refusing to pay the loan . So how could the deduction be allowed ? , It could only be allowed , if you were continuing to pay .
Having said all that , I certainly feel a great deal of sympathy for those with loans , and I guess I well understand why you would not want to pay .
But I reckon the initial post relates purely to the changes in 2007 . I think the loans are another matter .
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