Mortgage and Real Estate Taxes paid

[rfk]

I have a client who came to me with a CP 2000 where the mortgage interest was denied for the portion of interest that was in the parents' name -- 1098. They are paying the taxes and interest, but a portion of it is not coming in there names -- as stated in the parents' names. In total the amount seems split down the middle regarding the total amounts. It appears that they are legally and financially responsible for the expenses, all things considered.

I am going to ask them who is on title. As an argument to the IRS, I am going to use Section 163(h)(3) as a guide to deducting the interest etc. However, I still need to know if RE taxes not in their name is deductible. A portion is and a portion is not.

Thanks for your help.

RFK

[solomon]

If the client actually has the burdens and benefits of ownership, then the client is the beneficial owner entitled to interest and RE tax deductions.

[joanmcq]

Is it under one of the parent's SSNs and they are second, etc, on the mortgage or is the mortgage entirely in the parent's names? Iv'e never seen a mortgage company 'split' a 1098.

[Gretel]

If the client actually has the burdens and benefits of ownership, then the client is the beneficial owner entitled to interest and RE tax deductions.

I disagree on the RE taxes. Mortgage interest deduction and RE tax deduction are based on different code sections. As far as I know only mortgage interest can be deducted by the equitable owner.

[solomon]

I disagree on the RE taxes. Mortgage interest deduction and RE tax deduction are based on different code sections. As far as I know only mortgage interest can be deducted by the equitable owner.

Beneficial Ownership

[RLymanC]

See TC 2008-84

This is from TC 2008-84

We find petitioners were equitable and beneficial owners of
the property. Because it is undisputed that the residence
property is a “qualified residence” under section 163(h)(4)(A),
we find petitioners are entitled to the claimed Schedule A
deductions for the mortgage interest on the residence property.

[Gretel]

Beneficial Ownership

I think this is just someones opinion not anything I would rely on and sure enough not substantial authority (even Pubs & privat letter rulings are not considered "substantial authority").

[solomon]

I think this is just someones opinion not anything I would rely on and sure enough not substantial authority (even Pubs & privat letter rulings are not considered "substantial authority").

Reread the Reg. Court cases are included in types of authority for substantial authority. From §1.6662-4:

...only the following are authority for purposes of determining whether there is substantial authority for the tax treatment of an item: Applicable provisions of the Internal Revenue Code and other statutory provisions; proposed, temporary and final regulations construing such statues; revenue rulings and revenue procedures; tax treaties and regulations thereunder, and Treasury Department and other official explanations of such treaties; court cases...

Others are delineated. Oh yes, private rulings after 1976 are included.