Claiming Mortgage interest on itemized deductions

[TaxLadyinPA]

Boyfriend (Bob) and girlfriend (Sally) have lived together for 10 years (PA does not have common law spouses).
I have been doing both returns for 8 years.
Bob files head of household claiming THEIR son (he has the higher income)[Good time to tell you there is NO earned income credit as both have high incomes]. Sally files single.

In past years….. Bob brings mortgage interest statement and real estate taxes in his name. He itemizes deductions.

Now there is a twist. They refinanced the mortgage. Because Sally was the one who did the actual paperwork with the finance agency the refinanced loan ends up in her social security number and name first on the loan.
I flipped out (I'm to old to actually flip) LOL …

I now ask questions … was the old loan in both names even though the interest statement came in Bobs name only … answer 'yes'. (I never questioned it before)

I find out the property is only in Bob's name (Sally didn't know that until we investigate and she asks Bob).

My question is …… do I now have to split the mortgage interest between them? Can I give it all to Bob as I've done in the past ? (I think not when it is now in her name and social first) - (Good time to tell you that the mortgage company added his name on the statement. - it says Sally so-in-so and Bob (no last name on the paper for bob)

I'm thinking Sally isn't to smart when she signs for a loan on property she doesn't even own. And on that note …. Can she deduct any of it at all when she has no ownership in the property.

And what happens if I have to tell them she cannot deduct any and he can only deduct half …. They are going to go elsewhere to have it prepared because I now know to much and they won't tell the new preparer most of the info.. …. LOL

Thanks for your input!!!!

[solomon]

If Bob pays, then he deducts. From §1.163-1(b):

Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.

[HBurkholder]

[QUOTE=

I'm thinking Sally isn't to smart when she signs for a loan on property she doesn't even own. And on that note …. Can she deduct any of it at all when she has no ownership in the property.

QUOTE]

I am thinking the mortgage co was not too smart making a loan to someone who does not own the property.

[thomtax]

I am thinking the mortgage co was not too smart making a loan to someone who does not own the property.

Imagine the mortgage company's surprise if they ever go to take the property mortgaged and find out that there is no property. Of course, the seemingly logical extension of this could be her being charged with fraud by getting a loan using something she does not own as collateral.

LT

[TaxLadyinPA]

§1.163-1(b)

If Bob pays, then he deducts. From §1.163-1(b):

Quote:
Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.


I like your way of thinking ..... so I need to find the irc and make sure I print it out so I will have it in my notes.

my concern was him claiming it all and the fact that there is no way for the IRS to track it when his social sec. no. is not on the interest statement.

Thanks!!