Posted by pwn on August 21, 2001 at 23:09:54:
You need to look into the tax consequences of this for yourself and for your mother. “Zero interest” on a loan is not considered an “arms length” transaction (transaction between two rational persons). I think the tax man will look at it as a note with a “pro-forma” interest at the current market rate. This would reduce your tax basis on the property, and when you sell you may have to pay higher capitol gains. You might be better off setting a low rate than no rate. Otherwise your mother may be stuck with taxes on “interest earned” at the current market rate.
Also, you may be better off having your mother sell the house outright (if it was her primary residence she shouldn’t have to pay taxes on the gain) and give you “gifts” of< $10,000 a year.