From: Miramar, FL

Dear TaxMama,

Due to my husband's stroke, we found it necessary to combine households with my daughter and her husband.

Our new home was large enough for my husband (who was confined to his wheelchair and hospital bed), my daughter, my son in law, and my two teenage grandaughters.

The purchase of our home was made possible through a loan I qualified for, due to my higher credit scores.

My name is on the mortgage and title alone, but it was my son in law who was making all the payments. Under the advice of his tax consultant, they listed the mortgage interest and taxes they paid as a deduction.

They were selected for a tax audit and were informed that because they were not "legally" responsible for the mortgage or taxes on the property they could not claim the deductions.

From one mother to another, can you recall hearing of this type of situation? And can you lend us some of your motherly advice?

Best Regards,

Lina

 

 

 

Dear Lina,

Tsk, for heaven's sake. This is so silly.

It's bad enough to suffer the misery of being ill - but then to cause your child to go through such problems.

Come on, even IRS knows how common this is. They are sufficiently familiar with the concept of "beneficial owners" that they ought to have a questionnaire on this to avoid just such problems.

In fact, I am going to forward this to IRS and to the Taxpayers Advocate's office just for that purpose (without your contact information, of course).

What you should have done at the time you bought the house was one of two things -

1) After escrow closed, you should have put your daughter and son-in-law on title.

and/or

2) You should have drawn up a mortgage between you and your daughter and son-in-law making them liable to pay you mortgage payments. And the note would have said that they are to make the payments to a third-party - the mortgage company.

But you didn't. But the facts are the same.

Your intention at the time you bought it was for all of you to own it. Or for your kids to own it.

Searching Google, there are over 80,000 entries for this situation.

At this point, I suggest that your kids do some reading about beneficial owners, until they are very familiar with the concept.

Then, call the auditor and have a very FRIENDLY chat, explaining the circumstance and how it fits the definition.

Print out some examples or cases - and fax them to the auditor with a cover letter.

If you are afraid to do this, let me know, I know some aggressive tax professionals in Florida.

And I am very disappointed in your son-in-law's tax advisor for not insisting that the title and loan paperwork be taken care of at the outset.

We should be catching things like this when someone shows a Form 1098 mortgage statement with someone else's name on it.

But that's just one humble girl's opinion.

Best Wishes,
Eva Rosenberg, MBA, EA