Who Can deduct Mortgage Interest and Real Eastate Taxes

[15Gornzz51]

1] Who can deduct mortgage interest in the 4 cases below?
A] A taxpayer who is legally obligated to pay the mortgage (a borrower whose name is on the loan) and actually paid the interest. You don't have to be an owner (your name is not on the deed).

B] A taxpayer who is legally obligated to pay the mortgage (a borrower whose name is on the loan) and actually paid the interest, and you must be legally obligated to pay the taxes (be a legal owner against whom taxes are assessed - your name is on the deed).

C] A taxpayer whose name is not on the deed, but a taxpayer who is legally obligated to pay the mortgage (a borrower whose name is on the loan) and actually paid the interest.

D] A taxpayer whose name is not on the deed nor the mortgage. But the taxpayer is an equitable owner.
Equitable owner meaning the taxpayer proves that even though they do not have legal title, they bear the benefits and burdens of the property and are thus the true owner under the law for certain purposes.


2] Can only taxpayers whose names are on the deed deduct the real estate taxes?

[Rapid Robert]

What is the difference between 1A and 1C? Seem to be identical.

Property tax: "Enter on line 5b the state and local taxes you paid on real estate you own that wasn't used for business,"

Mortgage: depends on facts and circumstances. Excerpt (credit Karen Brosi, Western CPE):

"Where the taxpayer has not established legal, equitable or beneficial ownership of
mortgaged property, the courts generally have disallowed the taxpayer a deduction for the
mortgage interest (Song v. Commissioner, T.C. Memo. 1995-446; Bonkowski v.
Commissioner, T.C. Memo. 1970-340, affd. 458 F.2d 709 (7th Cir. 1972)).

State law determines the nature of property rights, and federal law determines the
appropriate tax treatment of those rights. It is presumed under California law that the
owner of legal title is the owner of the full beneficial title. This presumption may be
rebutted only by clear and convincing proof.

In Uslu v. Commissioner (T.C. Memo. 1997-551) Mr. and Mrs. Uslu made mortgage
payments on a residence for which legal title was held by Mr. Uslu's brother and sister-
in-law. The court found in Uslu that the taxpayers "exclusively held the benefits and
burdens of ownership", and, therefore, were the equitable and beneficial owners of the
residence.

Such was not the case in Hackley v. Commissioner (T.C.S. 2002-19). Like the Uslus, H.
H. Hackley made all the mortgage payments, and paid all real estate taxes, homeowner's
insurance, and repair and maintenance bills on an L.A. residence he asked his sister, Ms.
Orum, to "get in her name" because of his poor credit. Hackley lived alone in the
property and did not pay rent to his sister, also like the Uslu case. Unlike the Uslus,
however, who benefited from Mr. Uslu's brother's testimony that he considered the Uslus
owners and responsible for the property, Mr. Hackley's sister never testified on his
behalf!"

[TaxGuyBill]

1) All of the above.

2) I had originally learned that was the case, but then I found something that indicated that the "equitable owner" rule can also apply to real estate tax.