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Posted by tdmailbox on January 30, 2007, 11:50 am
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I bought a two family house and then decided to renovate it.
My father loaned me about 130K so far. He is borrowing
the money fully from a HELOC on his house to fund us. He
has some cash on hand but in order to not have to deal with
the rules about discounted loans all the funds he gave us
come right from the heloc.
He gets an intesest statement monthly, I pay it. My
interest paid matches exactly what HIS 1099 from HELOC
states. Since we are in paying the interest on the HELOC
right from the statments this is a market rate loan.. No
special deals for me :)
I think I need to 1099 him as when we sell I want to include
this cost in our interest expenses.
My thought is I need to 1099 him for the interest we paid
him, he then puts that on his return as income against the
interest he paid that is shown on his 1099 from the bank
that underwrote the HELOC.. That would make it a net zero
transaction for him and we would still have a 1099 to clain
the interest expense ourselves. Is that right? Is there
something I am missing.
I tried searching all over the internet and there is a lot
of information on family loans at no interest but I couldnt
find anything on family loans where the family member
in-turn re-borrows the money.
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