Massachussetts Governor Admits Possible Error on Tax Return
BOSTON (AP) _ Gov. William Weld said there may be an error on his federal income tax return, which indicates that he and his wife owed no federal taxes for 1991.
The Massachusetts governor, who is vacationing in Virginia, was ″horrified″ to learn about the apparent problem with his taxes, spokesman Ray Howell said.
Weld plans to meet with his accountant Tuesday to discuss whether he improperly deducted home mortgage interest on his 1991 tax form. Today is a state holiday.
″If, as it appears, there is an error, the governor will file amended returns and pay any taxes and interest that are due next week,″ Howell said.
In question is a $77,431 deduction for interest payments that Weld and his wife, Susan, took on a mortgage for their Cambridge home. The couple’s joint 1991 income was $166,277.
The couple bought the home in 1975, but refinanced it for $800,000 in 1990 and used much of the proceeds to pay for Weld’s gubernatorial campaign.
Donald Taub, an accountant who reviewed the Welds’ taxes for The Boston Globe, said the Welds’ interest deduction seems to violate IRS rules.
Howell said Weld was apparently unaware of the tax code section in question. Officials for Fiduciary Trust Co. of Boston, which prepared the return, declined to comment on the possible error, referring calls today to Weld’s office.
According to documents at the Middlesex County Registry of Deeds, the Welds bought the home for $150,000 in 1975. It is now assessed at $1.1 million.
The records indicate that by 1990 the Welds still had the original $80,000 mortgage and a $25,000 second mortgage, taken out in 1985.
During summer 1990, Weld refinanced the old mortgage with a $700,000 note from the Northmark Bank in North Andover. He also received a $100,000 home equity line of credit from the same bank.
Weld spent $543,000 of the proceeds for his campaign, according to records at the state Office of Campaign and Political Finance. Political observers said financing was a factor in Weld’s victory over his Republican opponent, former state Rep. Steven Pierce of Westfield.
Most home mortgage interest is deductible, but tax specialists said it depends on the amount, the date the loan is taken out and how proceeds are used.
Tax specialists said the Welds appear to be entitled to deduct interest payments on the original $80,000 mortgage and the $25,000 second mortgage, taken out before a 1987 change that made it harder to deduct mortgage interest used for purposes other than buying, building or improving a home.
But the $800,000 refinancing from 1990 is considered home equity debt, because it apparently was not used to buy, build or improve the home.
According to the IRS, interest on only $100,000 of that amount would be deductible. But by taking a $77,431 deduction, the Welds’ return indicated they were deducting interest on the full $800,000.
IRS spokesman Robert Ruttenberg said he could not comment on whether the Welds made a mistake on their tax form. If they did, they could file an amended return to rectify it, he said.