Seller sold a home to the buyer and the note was handled thru Loan Care Account Servicing. The Seller did not have enough money to pay off their original loan, but they found an investor to put in some money to close the deal. The buyer pays the full monthly payment to Loan Care. The Loan care takes out enough money to pay the investor, pays the investor and sends the balance to the seller.

Loan care at the end of the year sends the seller a 1098 Mortage interest statement for the full amount of the loan. Then Loan Care also sends the seller a 1099-INT to the seller for the amount of interest paid to the Investor.

How do I report these two statements on the tax return?

OPTION 1 1099INT goes on Schedule B and the 1098 goes on the Schedule A. This is how it has been done in the past, but this year the client does not have enough to Itemize on Schedule A.

OPTION 2 Report the 1099 INT on the Schedule B, and then put the 1098 on the Schedule B as a Nominee distribution. This seems like the fair way to do it.

I am interested in how you would report this. Looking forward to your input.

Thank YOu.