tax treatments for creative financing issues - Posted by tes

Posted by William Bronchick on December 06, 2000 at 19:04:14:

I am not sure what you mean by “resident beneficiary” but the IRS looks at a land trust beneficiary as the owner of the property. If the beneficial interest is owned by someone else, then THAT owner is the taxable owner and your resident is a tenant. Reporting of mortgage interest is irrelevant to who is entitled to the deduction. The person ENTITLED to the deduction may take it. This requires that one claim the property as their principal residence and have an ownership interest.

tax treatments for creative financing issues - Posted by tes

Posted by tes on December 06, 2000 at 18:58:46:

For investment purposes, we have been purchasing some rental properties (condos). ANd put each property in a separate trust. Interest in the subject Trust Property is being acquired for investment purposes only. And the Trustee has taken the title to the Trust Property, the Trustee shall hold such property , and the proceeds and profits from it, in trust for the ultimate use and benefit of the Benificiaries and their successors or assigns.
The resident beneficiary signed an unsecured Promisory Note (paying interest only to the Trustee )and has the option to buy the property at any time during the course of the Trust Agreement.

The questions are:

  1. can the Trustee issue this resident beneficiary a 1098 for the interest payments he made?
  2. if the resident beneficiary receives the 1098, can he deduct this from his Schedule A as part of his itemized deductions?
  3. how will the income from this interest payments be reported on the part of the Trustee and owner?
  4. will these income (interest payments)be reported by the
    owner as interest income? in which tax schedule is he suppose to report this?
  5. how will he report the mortgage payments he’s making on this property? is it going to be in schedule A?

I would appreciate some enlightenment on this issue. Thank you.