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I have TP who ran a business(sch c). Mortgaged the building to the hilt. Business went south. (prior Covid 19)TP closed. Still paying interest on note cause he can't sell. No buyers or ones that want to pay .50 on the dollar. Can I make a sec 266 election and carry the intertest forward till he sells. I do not think it belongs on form 4952(investment interest). What do you think?

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Interest tracing rules apply. It really depends on what the mortgage proceeds were used for. If the proceeds all went into the failed business then you're OK

if he spent the proceeds on personal stuff , a boat ,vacations, paying off personal credit card debt then no.

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