Legally Liable and Mortgage Interest

[DaveinTexas]

If someone is on the title of a home named Joe, makes the mortgage payments for the home, but is not the borrower on the note; does this make the payer of the mortgage legally liable for the loan?

The loan is secured by the home and if the payments are not made, the lender will foreclose on the property. If Joe does not make the payments, since he is on the title, is he legally liable?

TIA

[DaveinTexas]

Found the answer

I've never answered myself but here goes:

Sec. 1.163-1 Interest deduction in general

(a) Except as otherwise provided in sections 264 to 267, inclusive, interest paid or accrued within the taxable year on indebtedness shall be allowed as a deduction in computing taxable income. For rules relating to interest on certain deferred payments, see section 483 and the regulations thereunder.

(b) Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.

It goes on, but if anyone is curious, check out the wording in section b. You can deduct mortgage interest if you are the equitable owner, but not on the mortgage; thought this was interesting.

[jimmcg]

Uslu v. IRS

Check the above US Tax Court Case for some interesting guidelines re qualifying as equitable owner under Reg1.163(b), believe it was around 2002-2003.

[solomon]

The key for deductions for a beneficial owner is proving the burdens and benefits of ownership. This was done in Uslu as well as Trans. However, in the Nair case, he failed to prove the burdens and benefits of ownership.