Interes Deduction

[ED SMITH]

Client is trustee for mother's home and took out $150K loan to invest in a partnership in which he is actively engaged. The partnership is an association of harbor pilots, there are no physical assets involved.

Previous preparer reported it as interest on a partnership loan and show up on the K-1 as other income/expenses.

What is the best way to handle the interest payments.

BTW, the loan is under his SSN.

TIA
Ed

[Snaggletooth]

Fish Smell

This doesn't by definition have to be an illegal transaction, but it probably is selfish and ill-advised.

This loan is 4952-type interest for the party in question on his personal return, not for his mother's 1041.

Just my opinion, Ed.

[ED SMITH]

This doesn't by definition have to be an illegal transaction, but it probably is selfish and ill-advised.

This loan is 4952-type interest for the party in question on his personal return, not for his mother's 1041.

Just my opinion, Ed.

That's the way I handled it, but it was not the way the previous accountant did. Now the client is not happy he is not getting the same deduction.

The mother was alive at the time of the loan, about 10 years ago. She died last year, so no 1041 involved until now. Although he says he was a trustee, I will have to find out if it was some sort of guardianship.