In misc.taxes.moderated, nish wrote:

- quote -


I think you are looking for something that will handle "negative
amortization". This looks like a good start to create a calculator
in a spreadsheet.

http://www.vertex42.com/ExcelTemplat...alculator.html

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In article <Xns9B86A537DF18spamtraplexregiacom[at]130.133.1.4> ,
Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

Close: until the payment reduces the principal below the *low-water
mark* on the loan, it's interest. (E.g. $100K original loan, paid
timely until balance reached $80K, then not paid and interest pushed
the balance up to $105K. Until payments reduce the balance to $80K,
they're all interest.)

Seth

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paultry <afn02552at[at]afn.org> wrote:
- quote -

Good observationa! From that standpoint it should be easy for OP to
determine that any payment that does not reduce principal below the
original loan amount is all interest for tax purposes. When the loan
amount does get back to the original principal amount, the standard
amoritization table should be accurate.

Stu

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In article <gjjcpo$pbs$1[at]news.motzarella.org> ,
paultry <afn02552at[at]afn.org> wrote:
- quote -

Why are you doing this?

Are you willing to start with several on-line mortgage calculators?

http://www.bankrate.com/brm/popcalc2.asp

http://www.bretwhissel.net/amortization/amortize.html

http://www.amortization-calc.com/

http://www.vertex42.com/ExcelTemplat...readsheet.html

http://www.ppar.com/amortization.htm

http://www.hsh.com/mopaytable-print.html




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ArtKamlet at a o l dot c o m Columbus OH K2PZH

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nish wrote:


- quote -


You'd first have to look to the terms of the loan to
determine how payments should be allocated. Many loans call
for timely and late payments to be applied first to accrued
interest and fees before principal. The application of a
series of timely payments would match a predetermined
amortization schedule, but multiple late payments would
limit the usefulness of that schedule. You probably won't
find any freely available loan amortization software that
will provide many "what if" scenarios for application of
late payments. You might find something that computes
accrued compound interest between payment dates, or you
could write spreadsheet formulas to do the same. From there
you'd have to apply the payment application rules spelled
out in the loan contract to determine divisions between
principal, interest and fees.

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"DF2" <replyvia[at]newsgroup_please.com> wrote in message
news:utcnl49s759kbp8lepl5osadadjihseiqe[at]4ax.com...
- quote -

Let's say you have a $10K loan. After several years of non-payment on that
loan, most software reports the "principal" on that loan as much more than
$10K. In a compounding interest loan, the interest each period is added to
the principal to get the new principal.

- quote -

suspect the IRS looks at it a similar way.

But from the standpoint of most compounding interest software, "principal"
means the original loan amount PLUS any unpaid interest. That's a much
different meaning of "principal". And the only software for compounding
loans I have seen to date provides amortization reports where you lose all
sense of what amount of each payment pays off the original loan amount.
The software reports payment of "principal" using the software's definition
of principal, not the IRS or lender's definition of principal.

As a person or company making a loan, and intending to pay taxes on interest
on that loan, you need a tool that lets you clearly distinguish what part of
each payment paid off the original loan amount. That's what I am trying to
find. It's fine if the software also reports against some alternate
definitions of principal. But at minimum I need to understand for tax
purposes how much of the loan payment is paying off the original loan
amount. So far I cannot find software that does this.

nish

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In misc.taxes.moderated, nish wrote:

- quote -

It is not clear what you mean with #2. If you mean that the software
tells you the breakdown, then that is a typical feature in many loan
amortization calculators. Search for the term, and you will find
many available free.

http://www.bankrate.com/brm/popcalc2.asp is an example of a more
complex one.


- quote -

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On Dec 24, 6:55 pm, "nish" <ni...[at]nunya.org> wrote:

- quote -

This topic is kind of new to me, so I don't know the answers, but if
the number of years of the loan is undefined, then shouldn't any
interest payment be directed first towards reducing principal? If the
number of years is known then the interest portion can be calculated
through a formula.

The interest portion of the loan in the n'th month is
I[n] = a - (L[n-1] - L[n])
where I[n] is the interest portion of the loan in the n'th month, a is
the monthly payment, L[n-1] is the amount of the loan remaining in the
n'th minus 1 month, L[n] is the amount of the loan remaining in the
n'th month.

Through some math I've calculated a to be
a = L * r / (1-(x^(-N)))
where L is the loan amount, r is the interest rate like 0.06 for 6%,
x=1+r, N is the total number of terms -- if compounded monthly for 30
years then N=360.

And also I've calculated
L[n] = L * x^N - a * (x^n-1)/r

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Most software that records and reports simple interest loans, makes it very
easy to see what part of each payment is a repayment of the original
principal, and what part is a payment of interest. Compound interest
apparently makes the reporting of the loan payments by the lender more
difficult. The compounding interest gets added to the "principal" used by
the loan software to calculate the next interest payment. As a result,
the loan software loses a clear sense of what the original loan principal
was at the start of the loan. And if the loan misses a few payments the
principal in the loan starts to exceed the principal that the lender
originally lent. From the standpoint of paying taxes on interest payments,
I would have thought it would be important to clearly distinguish in each
loan payment what part of that payment paid off the original principal and
what part pays off accumulating interest.

Can someone recommend a software package for a compound interest loan that
does the following things:

1) Makes a clear distinction between the original principal on a compound
interest loan and the accumulating principal used to calculate the compound
interest on the loan.

2) Gives a way for each payment to specify how much of the payment is for
original principal and how much of the payment is for accumulating interest?

I know of several software packages that do the above for simple interest
loans. That is not what I need here. I need these capabilities for
compound interest loans.

Is there some IRS rule for compound interest loans that takes away the
choice for borrower or lender to decide how to allocate payments between
original principal and accumulating interest? If there are firm rules for
how the repayments must be accounted for tax purposes, I would appreciate a
pointer to those guidelines.

nish

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