Home Equity Line of Credit

[Jesse]

How much was the loan for? Less than $10,000 could be considered a gift loan?

I'm trying Veritas!

[S T]

One more question

Thanks Veritas and Jesse,

My thought is that Mom loaned the money to son to pay off personal debt (verifying that now), so therefore the Son would not be able to deduct.

I would think that the best Mom could do would be an offset, since son is repaying the loan/interest amount which would be income to Mom, and then she deduct the HELOC interest on her return.

I agree with Veritas, this could be very bad form Mom\estate , either a non business bad debt, or an early gift against this son's inheritance.

Sandy

[veritas]

Of course she

didn't ask first did she?

What I see here is a loan from the mother to the son. The payments for the loan by the son includes interest which the mother should include in her income. She can treat the interest paid on the mortgage as home equity or investment interest.

This can have several bad tax ramifications for the mother.

As to the son, it depends what he did with the money. For example, If he put it into his business he could deduct it as business interest.


She probably will end up with a non-business bad debt in the long run.

Recently I heard the best advice for family loans. If you don't have it don't loan it. And if you have it don't loan it just give it.

[Jesse]

My thoughts were ................

Mom can't deduct the interest because she did not make the payments.

What if son repays Mom for the personal loan. Mom pays the bank for her home equity loan. Then she made the payments so she can take the deduction for the home equity interest, assuming no other disqualifying events such as AMT, not more than $100,000 or FMV of home, etc....

I'm probably missing something?

[S T]

Restructure

Jesse, how would you restructure the loan to the son?

Sandy

[Jesse]

I would agree with you. I can't see any way that the son could take it. Perhaps they should restructure so son pays Mom and Mom pays the bank for 2009.

[BHoffman]

Too bad Mom can't just report it on her Sch A and write Son a check for the difference.

Can you report it on Son's Sch A line 11?

[S T]

Parent obtains a HELOC on her primary residence and loans the money to her son from this loan. Son makes all of the HELOC payments directly to the Bank, but he is not on title on the House or the Loan.

Parent/taxpayer does not want to claim the interest on her tax return, but would like for the son to be able to claim interest paid on his tax return.

Wouldn't this just be a personal loan and neither the parent (since she is not making payments) nor the son can take the deduction?

Thanks,

Sandy