The mortgagor skipped three payments in 2010 and the mortgagee added the unpaid interest back to the loan principal.
In January 2011 the mortgagor sold the house and paid the total principal balance to the mortgagee.
Should the unpaid 2010 interest which was paid upon final settlement be considered 2010 interest (on Schedule A) or 2011 Interest (on Schedule A) or neither? Similarly how should the mortgagee treat the interest: 2010 income or 2011 income?
Both the mortgagee and mortgagor are on the Cash Basis.
Note: There is no taxable sale involved since it was the mortgagee's former home and sec 121 exclusion applied when it was sold.
In January 2011 the mortgagor sold the house and paid the total principal balance to the mortgagee.
Should the unpaid 2010 interest which was paid upon final settlement be considered 2010 interest (on Schedule A) or 2011 Interest (on Schedule A) or neither? Similarly how should the mortgagee treat the interest: 2010 income or 2011 income?
Both the mortgagee and mortgagor are on the Cash Basis.
Note: There is no taxable sale involved since it was the mortgagee's former home and sec 121 exclusion applied when it was sold.