I haven't the faintest idea how to handle this and would appreciate any help.
In January 2006, my new client took out a home equity line of credit on her own home to cover the $15,000 down payment on a house for her newly divorced son to live in. There were both first and second mortgages negotiated at the time of purchase as well as the HELOC. Only the client’s name is on the mortgages.
The son’s name was added to the deed via a quit claim deed executed several days after closing on the house. This was done to get the state’s homestead exemption, which reduces the annual property tax, since the son is using it for his primary residence.
The intent was for her son to assume the mortgage or negotiate a new mortgage in his own name sometime in the future, although there was no written contract or loan agreement between the client and her son. In the meantime, the client made the mortgage payments, which included insurance and property taxes, and paid for repair, maintenance, and most of the utility bills. The son would give her various sums of money monthly, to pay toward those expenses. These sums were never enough to cover utilities, maintenance, property taxes and interest paid in any one year. These payments from the son continued through November, 2008.
The mortgage payments the client made on the first and second mortgages are not enough to cover interest and escrow so her current principal balances are greater than at the time the mortgages were taken out. It’s hard to tell what's going on with the HELOC since other expenses, including some of the son’s personal expenses, were charged to the HELOC. (Why my client gave her son the card to use is beyond me.)
The son lived in the house from the time of purchase until November, 2007, at which time the son arranged for renters. The renters deposited the rent directly into the client’s account. The total rent received in 2007 was $550 and in 2008 was $4500. The property is now empty and the client is attempting to negotiate a short sale.
I was first thinking of this as a not-for profit rental, until I found out that the son’s name was put on the deed. Now I am not sure what to do with this. The previous preparer put all of the interest (1st & 2nd mortgages + HELOC) on the client’s Schedule A, but not any of the property taxes, and did nothing with the rent.
In January 2006, my new client took out a home equity line of credit on her own home to cover the $15,000 down payment on a house for her newly divorced son to live in. There were both first and second mortgages negotiated at the time of purchase as well as the HELOC. Only the client’s name is on the mortgages.
The son’s name was added to the deed via a quit claim deed executed several days after closing on the house. This was done to get the state’s homestead exemption, which reduces the annual property tax, since the son is using it for his primary residence.
The intent was for her son to assume the mortgage or negotiate a new mortgage in his own name sometime in the future, although there was no written contract or loan agreement between the client and her son. In the meantime, the client made the mortgage payments, which included insurance and property taxes, and paid for repair, maintenance, and most of the utility bills. The son would give her various sums of money monthly, to pay toward those expenses. These sums were never enough to cover utilities, maintenance, property taxes and interest paid in any one year. These payments from the son continued through November, 2008.
The mortgage payments the client made on the first and second mortgages are not enough to cover interest and escrow so her current principal balances are greater than at the time the mortgages were taken out. It’s hard to tell what's going on with the HELOC since other expenses, including some of the son’s personal expenses, were charged to the HELOC. (Why my client gave her son the card to use is beyond me.)
The son lived in the house from the time of purchase until November, 2007, at which time the son arranged for renters. The renters deposited the rent directly into the client’s account. The total rent received in 2007 was $550 and in 2008 was $4500. The property is now empty and the client is attempting to negotiate a short sale.
I was first thinking of this as a not-for profit rental, until I found out that the son’s name was put on the deed. Now I am not sure what to do with this. The previous preparer put all of the interest (1st & 2nd mortgages + HELOC) on the client’s Schedule A, but not any of the property taxes, and did nothing with the rent.
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