Discussion:Mortgage and Dependency. PLEASE HELP!
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Mortgage and Dependency. PLEASE HELP!
Ryanaukerman (talk|edits) said: | 9 January 2006 |
| My friend bought a house under his fathers name, but he pays the mortgage every month. Can he claim the mortgage interest as long as his dad doesn't?
He also supports his girlfriend and two kids, they recieved a partial amount of welfare for the year though. Can he still claim them since he did in fact provide more than 50% of there support for the year? Please help, Thanks, Ryan | |
| 9 January 2006 | |
| Ryan: Take a look at a similar question and the answers in the next 50 topics. Look for the topic of "Mortgage Interest/Living Together" dated Jan 5.
For your second question, I doubt it, if they received partial welfare for the year. | |
Ryanaukerman (talk|edits) said: | 9 January 2006 |
| Thank you | |
DDouglasCPA (talk|edits) said: | 9 January 2006 |
| You have to be "legally liable for the debt" in order to take the mortgage deduction. Having father quit claim the deed may be one option, should discuss with a lawyer. Could also make son legally liable on the note. Purhaps a purchase contract between the parties subject to the note, again there may be additional considerations and should speak with an attorney. | |
| 9 January 2006 | |
| Interest paid is deductible for which they are legally liable. Reg 1.163-1(b) states in part that "interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the note secured by such mortgage, may be deducted as interest on indebtedness". The courts look to the benefits and burdens of ownership. | |
| 9 January 2006 | |
| So reading that section, the TP could/can take the mortgage interest deduction, even though not actually on the note/deed of trust? | |
| 9 January 2006 | |
| Yes - if the taxpayer has the benefits and burdens of ownership. Such as - - do they pay all expenses for the house? If the house sells well they receive all the proceeds? If 'yes' to both they have the benefits and burdens. If 'no' then they don't and can not take the interest deduction. | |
| 9 January 2006 | |
| The interest deduction may be available to the son if he satifies the "equitable ownership" requirement under Reg. Sec. 1.163-1(b).
He may not claim a dependency exemption for the children unless A) he adopts the children, or B) his girlfrient moves out of the home. This is due to the fact that a taxpayer may not claim a deduction under the "member of the household test" if the children are qualifying children of another individual (the mother). | |
