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Posted by Gil Faver on January 22, 2008, 10:36 pm
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> Gil Faver wrote:
>
>>>> If an investment property is purchased by a group of people, and
>>>> they are dividing the monthly mortgage payements equally, how
>>>> does the interest tax benefits work?
>>>>
>>>> Can they each take an equal fraction of the deductions, or does
>>>> the law not allow this sort of thing? I have a friend who only
>>>> gets the tax deductions once every 5 years (when it rolls around
>>>> to him) but he would rather have a smaller deduction every year.
>>>> Is this common?
>>>
>>> See form 1065. They have a partnership.
>>
>> Wouldn't they most likely use schedule E? And, I believe if they
>> are all liable to pay the mortgage and all in fact pay it, they
>> can all take their appropriate expense item.
>
> It's a partnership unless they establish that they aren't required to
> file as one. And the partnership agreement will determine how the
> income and deductions are allocated, assuming the agreement has
> "economic substance." I've never heard of this kind of arrangement,
> but it could well be valid.
>
now that I think about it, I think that if there is NOT a written
partnership agreement and no restriction on an individual selling, each
owner may use a Schedule E and the partnership return avoided (of course
they are still a partnership under non-tax law). This has worked in some
family situations I have seen, but don't know I would recommend it among non
family or families that are not truly on the same wavelength.
I don't know where my research on this point is - I last needed it ten years
ago.
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