- quote -

Here's the binding agreement from the case:

*****Start Quotation*********

Petitioner husband discussed this problem with Haluk, and
the two agreed that Maluk and his wife, Aysun, would obtain
financing, in their names, for the purchase of the Alisal
property, and that legal title to the property would be
transferred to Haluk and Aysun. They further agreed that,
upon the purchase of the Alisal property, petitioners and
their children would occupy the Alisal property, and
petitioners would make all mortgage payments on the property
as well as paying all expenses for repairs, maintenance, and
improvements. Basically, they agreed that Haluk and Aysun
would execute documents necessary to procure title to and
financing for the Alisal property, and petitioners would
exclusively occupy the property and perform all the
obligations pursuant to ownership of the property, financial
and otherwise. All of these agreements were oral but are
undisputed.

******End********

My point is that unless the person paying the mortgage for
someone else has a binding agreement that is enforceable,
the payments would not be deductible.

Alan
http://taxtopics.net

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- quote -

Alan, what am I missing here? Isn't the obligation to which you refer
the very thing that the court found created the type of interest
qualifying under the Regs? What more is there than the equitable and
beneficial interest created by the fulfilling of the family agreement?

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- quote -

There was a little bit more to this case then just an
equitable and beneficial interest in the property. The
plaintiff's brother arranged to get the financing for the
home because the Uslus couldn't. The brother held title and
the Uslus had an agreement with the brother to make the
payments. The court held that the Uslu's obligation to pay
off the mortgage was an enforceable debt. That plus their
beneficial interest met the test for deductibility. Here's
the relevant quote:

[17] In the instant case, petitioners' agreement with Haluk
and Aysun coupled with petitioners' continued occupancy of
the Alisal property and the performance by petitioners of
all of the obligations under the Alisal property mortgage
are sufficient to render petitioners' obligation to pay off
the mortgage, an enforceable debt, to Haluk and Aysun for
the amount of the mortgage at the interest rate specified in
the mortgage. See Amundson v. Commissioner, T.C. Memo.
1990-337; Belden v. Commissioner, T.C. Memo. 1995-360. On
this record, the Court finds that the mortgage payments made
by petitioners to Southern California Federal with respect
to the Alisal property were, in effect, payments of
principal and interest to Haluk and Aysun. See id. In other
words, the payments by petitioners constituted payments on
an indebtedness of petitioners.

Alan
http://taxtopics.net

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"Bruce E. Cobern" <bec[at]pipeline.com> wrote:
- quote -

This is the case in California. Here, if the daughter is on
title and lives in the home, she is recognized under state
property law (controlling for federal tax purposes) as
holding an equitable and beneficial (as well as legal)
interest in the property and therefore may deduct the
interest. See Uslu v. Commissioner (T.C. Memo 1997-551)She
should check with an attorney in her state of residence to
determine if this is the case. If not properly reviewed by
an attorney, a disaster may result, as in Dively v.
Commissioner (T.C. Memo 1993-395).

Timothy E Kelly,Esq.
Certified Specialist
Taxation Law
State Bar of California
Board of Legal Specialization

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Archmedes wrote:
- quote -

Okay, now let's define "legal or equitable" owner.

cheer$,
Harlan Lunsford, EA in LA

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"Archmedes" <none[at]aol.com> wrote:
- quote -

And that actually makes sense, because the owner who is NOT
on the mortgage needs to be able to protect his interest in
the property. In this instance, should the mother (who is
obligated to make the mortgage payments) fail to do so, the
daughter's interest in real property she owns could be
seriously compromised, because the bank would be able to
foreclose on the property. To prevent this the daughter
could make the mortgage payments, and it makes sense that
she be entitled to deduct the interest because she is
protecting her property interest.

Gee, sometimes there IS logic here. :-)

--
Bruce E. Cobern, CPA
mailto:bec[at]pipeline.com

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Pam wrote:

- quote -

She may pay it, but since she is not obligated to pay it,
no deduction.

Oh, and (assuming that ) if mother does not pay it, she also
gets no deduction, unless she can maintain and prove that her
daughter's residence is her (mother's) secondary residence.
But that's another ballgame.

Cheer$,
Harlan Lunsford, EA in LA

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"Pam" <PamHeard[at]aol.com> wrote:

- quote -

Usually, yes. Section 1.163-1(b), Income Tax Regs.,
provides, in pertinent part:

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 bond or note
secured by such mortgage, may be deducted as interest on his
indebtedness.

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PamHeard[at]aol.com (Pam) wrote:

- quote -

NO. The daughter has no obligation to pay the loan, since it
is in her mother's name. The mother cannot deduct the
interest, since she does not pay it.

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PamHeard[at]aol.com (Pam) wrote:

- quote -

Because daughter is not on the mortgage, she is effectively
paying rent. If the mother acknowledges the rent as income.
she "may be allowed" to deduct the interest and depreciate
the property.

There are exceptions:
1) The mother purchased the home for the daughter because
the daughter could not get a mortgage.
2) The mother is selling the home to the daughter on
contract.

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Help with this please. Facts - House is titled in mother
and daughter's name. Mortgate is in mother's name, but paid
by daughter. Daughter lives in house. Mother has a separate
residence. Can the daughter take the mortgage interest
deduction even though the statement will be in her mother's
name? Thank you.

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