revisitng = rental vs personal

[oceanlovin'ea]

TP and husband bought a house in 2008. The 2 of them are on the mortgage. The two of them and daughter #1 are on the deed. Don't know if it was original plan or not but daughter #1 and daughter #2 are living in the house.
Daughters pay the mortgage payment directly to the bank.
Mother is responsible for the other expenses on the house.

Parents can't claim mortgage interest on their tax return as second home because they didn't pay the mortgage.
Daughters can't clain the mortgage interest because they aren't on the loan so not liable.

Can't be rental property because daughter is on the deed. Can't rent to an owner.
Daughters pay mortgage which is around $750 a month. could rent the house for $900 or so. That means less than FMV anyway.

I told them there is no way to use the mortgage interest. Is there anything I am missing?
Is there some thing I am not seeing here?

Thanks

Linda

[ChEAr$]

TP and husband bought a house in 2008. The 2 of them are on the mortgage. The two of them and daughter #1 are on the deed. Don't know if it was original plan or not but daughter #1 and daughter #2 are living in the house.
Daughters pay the mortgage payment directly to the bank.
Mother is responsible for the other expenses on the house.

Parents can't claim mortgage interest on their tax return as second home because they didn't pay the mortgage.
Daughters can't clain the mortgage interest because they aren't on the loan so not liable.

Can't be rental property because daughter is on the deed. Can't rent to an owner.
Daughters pay mortgage which is around $750 a month. could rent the house for $900 or so. That means less than FMV anyway.

I told them there is no way to use the mortgage interest. Is there anything I am missing?
Is there some thing I am not seeing here?

Thanks

Linda

You're missing the same thing I was ten years ago when neither mother or daughter (I thought) could take the interest deduction under same facts as above;
until IRS changed their stance and said that one other house could be deemed/
designated second residence and thus qualify. by paying directly to mortgage company daughter is deemed to have made a gift to mother of same amounts.

The other hook to hang your hat on is for daughter # 1 to claim interest as
equitable owner.

But I would go with # 1 instead of the latter.

[oceanlovin'ea]

Thanks

Thanks for answering so quickly, Harlan. The client was calling me back around 9:30 and I wanted to have an answer for her.

So we will take it as a schedule A deduction.

I do think this has impressed upon her the need to think things through carefully and consult with tax professional about tax consequences of activities.

Linda