1098 In Individual Partners

[Alec Knorr]

I have an LLC with four partners. We've buying properties in one partner's name and then quit claiming the deed to the LLC after purchase. However, the 1098 is still being sent in the partner's name who bought the house. Is the LLC able to deduct the interest payments from the 1098 even though it is being sent to the partner in the partner's name?

[Ashish Acharya]

Originally posted by @Alec Knorr:

I have an LLC with four partners. We've buying properties in one partner's name and then quit claiming the deed to the LLC after purchase. However, the 1098 is still being sent in the partner's name who bought the house. Is the LLC able to deduct the interest payments from the 1098 even though it is being sent to the partner in the partner's name?

I think, technically, you need to assign the mortgage to the partnership so that partnership takes over. Basically that is what’s happening. Your partnership is taking over the payments. So, once you have that in writing, it’s ok. 

Practically, people rarely put something in writing. 

[Alec Knorr]

Thank you! To clarify - practically speaking having the 1098 continue to be in the partners name is no big deal and we deduct the interest through the LLC with no problems?

Thank you for the help I really appreciate it! 

[Eamonn McElroy]

You've probably been violating the due on sale clause of each property's mortgage agreement.

If the debt is never assumed by the partnership, I think we *might* have basis issues regarding losses.

A discussion with your CPA might be in order.

[Michael Plaks]

@Alec Knorr

Create a matching 1098 from the partner to the partnership. Called a "nominee recipient."

This is assuming that the partnership acted as the owner all along, i.e. all the money was flowing thru the partnership and the partnership funded the acquisitions and everything after. 

Check with your lawyer about various non-tax issues, such as insurance, legal liability, due on sale clause etc.