personal residence construction loan interest sch a

[myrtcpa]

Client received mortgage from a friend of the family. Market rate, but much more lenient to get the $$, than the traditional bank paperwork and % of completion. I read on the Sch A instructions for line 11: "If you bought your home from the recipient, be sure to show that recipient's name, identifying number, and address on the dotted lines next to line 11.

Is this situation correct for my client? - did he "buy the home from the recipient?"

Thanks in advance for any help.

[Ray in Ohio]

Client received mortgage from a friend of the family. Market rate, but much more lenient to get the $$, than the traditional bank paperwork and % of completion. I read on the Sch A instructions for line 11: "If you bought your home from the recipient, be sure to show that recipient's name, identifying number, and address on the dotted lines next to line 11.

Is this situation correct for my client? - did he "buy the home from the recipient?"

Thanks in advance for any help.

Did he buy the home from the recipient????

Either way, if I deduct "mortgage" interest paid to an individual I put their name, address & number on line 11.

No references to show you, but that's how I do it.

[myrtcpa]

Did he buy the home from the recipient????

Either way, if I deduct "mortgage" interest paid to an individual I put their name, address & number on line 11.

No references to show you, but that's how I do it.

He didn't buy the home from the recipient.

He had an undeveloped lot that he built a house on - moved into for new personal residence.

The family friend lent him the $$ for the construction.

I was able to get the name, address and ssn of the lender (friend), so I am going to play it safe and put it on schedule A.

Thanks

[jklcpa]

It sounds like most of the criteria has been met for this to be mortgage interest, BUT, to be deductible as mortgage interest, the debt must also be secured debt. Is the home security for the debt in the event of default?

Also, you might want to read the interest tracing rules. If your client put the entire proceeds into a checking account that was used for other purposes while the construction was going on, some of the debt will be considered other than mortgage debt. It could be personal or investment debt. For example, if he put the entire proceeds into an investment account & then paid out the construction expenses as needed, that interest could be investment interest.

All of that then brings up the ordering rules for repayment of the debt as well.