1098-Mtg interest statement required on a private note?

[nwtaxlady]

My clients bought a piece of commercial property from her Grandparents trust for $450,000. They rent it to a corporation and have plenty of rent income to report. The trust holds the note for the property sale. The payments are made to the trust with interest. They want to deduct the interest against the rental income. Can they if there is no Mortgage interest statement? And who is responsible for making out the 1098-Mortgage interest statement? The Trust or the client paying it?
And what if neither one of them wants to bother with it? The other CPA doing the trust return says he will claim the interest as income on the trust return, but sees no need for a 1098 form.

What is the correct way. They just bought the property in 2015 so want to make sure we are doing things right from the start.

[Roland Slugg]

Form 1098 mortgage interest statements are required to be prepared and filed by banks and others that are in the business of lending money. If the Trust isn't in that line of business, there is no 1098 reporting requirement. The interest is still deductible.

[taxea]

I recommend you keep an amortization spreadsheet and copy of the purchase agreement on file. Is this a installment agreement note? If so you need that to document the terms of the note and calculate the interest paid each year.

[TaxprepP]

I recommend you keep an amortization spreadsheet and copy of the purchase agreement on file. Is this a installment agreement note? If so you need that to document the terms of the note and calculate the interest paid each year.

I agree. make an amortization spreadsheet and keep with purchase agreement. It may be a good idea to give a copy of the amortization to the trust so they can be on the same page.

[Nashville]

Their CPA is correct

No requirement for the trust to issue a 1098 statement. However, if your clients have any reason to be assured that the trust reports the income, the client can issue a 1099-INT. If they don't have such a reason, then don't worry with it. Just make sure the loan instrument, amorz schedule, etc is intact.