From: Bill Gray
I feel there must be some implications of the following, but I am not sure how to handle it...
In 1990, I purchased my home with the aide of a shared equity partner. he "loaned" me $32,287 which I used (along with other funds) as part of the down payment on my home in California. In August of last year, I finally "bought him out" by repaying the original $32,287 PLUS $15,131 ((FMV - 1st - my initial investment towards down - a re-finance credit)/2).
How and/or where on my tax returns would any/all of this be reported OR even should it be reported??
Can you help and if so THANKS for the HELP!!!!
How your mortgage arrangement will be treated depends on how it was documented.
If a note was made with interest computed based on the increase in equity, and a lien was recorded that the note was secured by the house, the interest may be deductible as mortgage interest.
If the other party was on the title for the residence, he or she could have a capital gain to report and you might have a basis adjustment.
If the arrangement wasn't recorded, you could have non-deductible interest and the other party could have taxable interest income.
You need someone who knows what they are doing to study your documents.
My telephone number is (408) 918-3161.
From: Bill Gray
WOW! Thanks for a reply and a quick one at that! I honestly did not expect anything back as I have yet to receive a response from this query when posted with others.
Actually, the first is kind of the case. A note was created with interest payable by me monthly on the original investment. Each year I deducted this as "other mortgage interest expense" as my partner had reported this to the IRS (besides, I liked the write-off;-}). So, are you saying that the final $15,131 could be written in as mortgage interest also?
The other party was never on the title. Only had a second place lien.
How much would you charge to take a look at the documentation and provide your "best guess"? I want to do ther right thing, not get audited, and not lose out on what could be rightfully mine. But you understand this don't you... :-}
Why don't you call me at (408) 918-3161 and let's discuss this.
Based on what you're telling me, it looks like you should qualify for a mortgage interest deduction.
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