Mortgage loan from mom - 1099-INT?

Question

Does the lender or the debtor initiate the 1099-INT in a family situation like this?

Eric Williams · Answer

Well there ya go I learned something, gracias.

Michael Plaks · Answer

Sec. 6049 (b) (2)

(2) ExceptionsFor purposes of subsection (a), the term “interest” does not include—(A) interest on any obligation issued by a natural person

Eric Williams · Answer

I think it may be lower, if one is willing to entertain an alternative viewpoint:

(a) Requirement of reporting—(1) In general. Except as provided in paragraph (c) of this section, an information return shall be made by a payor, as defined in paragraph (a)(2) of this section, of amounts of interest and original issue discount paid after December 31, 1982.(b) Information to be reportedAn information return is generally not required if the amount of interest paid to a person aggregates less than $10 or if the payment is made to a person who is an exempt recipient described in paragraph (c)(1)(ii)(A) through Q

I looked through A to Q and didn't see an exception.

Also what is the loan for? Seller financing may require reporting of additional information on Schedule B:

"Seller-financed mortgages. If you sold your home or other property and the buyer used the property as a personal residence, list first any interest the buyer paid you on a mortgage or other form of seller financing. Be sure to show the buyer’s name, address, and SSN. You must also let the buyer know your SSN. If you don't show the buyer’s name, address, and SSN, or let the buyer know your SSN, you may have to pay a $50 penalty. If you or the buyer do not have an SSN, use the appropriate TIN for the filer or recipient of Form 1098. For more information"

If this is the case a 1099-INT may need to be replaced with a 1098-MIS, even if not in the lending business.

Not in the lending business.

If you receive mortgage interest of $600 or more in the course of your trade or business, you are subject to the requirement to file Form 1098, even if you are not in the business of lending money. For example, if you are a real estate developer and you provide financing to an individual to buy a home in your subdivision, and that home is security for the financing, you are subject to this reporting requirement. However, if you are a physician not engaged in any other business and you lend money to an individual to buy your home, you are not subject to this reporting requirement because you did not receive the interest in the course of your trade or business as a physician.

You want to consider looking up the factors of a bona fide debt to provide for future write-offs, avoiding a reclass as gift, etc.

Google blank loan agreement.

Michael Plaks · Answer

No, a form is not needed in this case. You can still deduct the interest, and she still needs to report it as income.

Doyle Brewer · Answer

Michael, the mortgage I took from mom was for my personal residence.  I assume I still need to send her a 1099-Int since I want to take the itemized deduction, right?

Eric Williams · Answer

There are nuances to related party transactions that were you to provide more information we might be able to add more useful information.

For example is the interest rate comparable to market rates of similar debt, or do adjustments for below market rates need to be provided for?

Is it related to seller-financing that might require more information provided on Schedule B?

If you want the deduction for interest expense, is there support for bona fide debt vs possibility for reclass as a gift between family member?

Hit me up if you have any questions.

Mortgage loan from mom - 1099-INT?

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