How do you write off interest on a property that I foreclosed on?

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investusa_IHB

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I loaned some money on a property and thus had a 2nd trust deed on the property. I had to foreclose on the property. I am now have taken the property back and am paying on the 1st trust deed that was in place. The loan is still in the other persons name as well as the 1098, for the interest paid, however, I was the one who paid the interest and am entitled to the tax deduction. Does anyone know how I take the deduction? What do I need to do to get the IRS to accept the deduction?
 
So you were in 2nd position, but after you had to foreclose on the person, you ended up owning the house ?





Also, why is the other person's name still on the loan ? Did you just "assume" it ?





Hmmm. perhaps awgee can help with this one.
 
yes, I now own the property, after the sale you are given a Trustee's deed. They are on the 1st loan still because that is the way forclosures are done, case law also supports this and CA codes. No I did not assume the loan, it is still on the persons credit and will be until I choose to refi, if I do.
 
IRS publication 936 states "<strong class="title">More than one borrower.</strong><a name="d0e1735" class="indexterm"></a> If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. You should let each of the other borrowers know what his or her share is".





Does anyone out there have any info on this topic ?
 
thanks, I had read 936 and found some info on Google, kinda wanted to talk to someone who had done it, since a couple of tax guys told me conflicting ways and that the IRS might kickback the return. But I am sure as the IRS see more of these they will get used to them
 
<p>Who is the tax document, now I forget the number, that shows how much interest was paid, going to? I suppose it is going to the foreclosee's name? Is is going to the house address? Where do the payment coupons and escrow analysis go?</p>

<p>You don't want to stick up your neck too far, because I presume the first has the due on sale clause. Not that I think lenders are going to be at all interested in enforcing a due on sales clause in today's environment. </p>

<p>Thing is the bank has the social security no of the former owner and hell will freeze over before thay change it.</p>

<p>Where is awgee when you need him?</p>

<p>Should you refi? By gosh, with the new raised conforming limits, maybe you should. How high is the interest rate? Is it due to reset any time soon.</p>

<p>Hmmm, did you get a copy of the note and mtg of the first when you did the second? You should get that, so you know where you stand. The mtg will be recorded, don't know how you can get ahold of the note. Maybe the title company? They might not because of privacy issues. </p>

<p>As usual with lawyers, more questions than answers.</p>

<p> </p>
 
All the documents are in the old owners name including the 1098, as well as the loan. In a foerclosure the lender can not exersise the due on sale clause. yes, it would be great to refi, but I am unable to at this time. I have all the information ie.. note terms, etc....I am looking for a person who has actually been in this situation before, probably someone who was in the last down turn....If you know anyone please advise, thanks!!
 
<p>investusa,</p>

<p>According to my CPA, if your name is on the deed and not on the loan, and you are the one who makes the deductible payments, then you are entitled for the tax write-offs. </p>
 
I was in London.<p>




And I disagree with NIR's CPA. The taxpayer who paid the payment, including the interest, is entitled to deduct the mortgage interest, as long as the payment is not a gift or a reciprocation or compensation for property or sevice.<p>


investusa - if you made the payment, you take the deduction, whether your name is on the deed, mortgage, or anything else. The IRS may CP2000 you or audit you if the 1098 is made out to someone else, but if you have appropriate documentation, you will prevail. JMO
 
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