1099 Question - From Bank To Seller
Hi. This question was raised by an attorney I just spoke to:
Will the Sub-to Seller still receive a 1099 from the morgage holder (of course they will, right?) and can they continue to use that as an income tax de/reduction? And what about the new buyer...will they be able to too with the LSC?
Forgive me if I don't really sound like I know what I'm typing about...because I don't. I'm a little confused. Some claification please??
Thanks,
Brian
Actually, it's a 1098. And the IRS matches them to socials on tax returns, so whether and how a Sub2 purchaser takes advantage of the mortgage interest deduction in that scenario and prevents the former owner from doing so could well present a problem.
It's a problem I haven't faced, but I would think that if you don't start getting that 1098 issued in your name as the sub2 debtor, you've got an audit coming if you try to claim some or all of it. Especially if the former owner claims some or all of it.
When you present proper documentation, the IRS should allow you the deduction. Will they? I don't know ... there may or may not be a revenue procedure or private letter ruling out there. The principle ought to be that if you own the property pay the interest you get the deduction, regardless of the bank's records. But the area may have experienced abuse, and the IRS may not be cooperating.
Caveat Emptor.
Generally the tax statement from the lender is sent to the property. This would only be different if someone tells them to send it somewhere else. You should have a POA from the seller, and you can instruct the lender to send the statement to the address of your choice. If you paid the interest, it's your deduction, not the former owner of the property. If audited, you would have the opportunity to show the purchase contract, and the cancelled checks etc. showing that it is indeed your deduction.
Jeff