Re: [taxchat] Equitable party

Not mentioned below is a key issue - that the taxpayer making the payments and taking the mortgage interest deduction must not only own the property (directly or via a nominee) but the taxpayer must also occupy the place as his primary residence, or use it as his 2nd home.

 

One of the issues the court decided was WHO is the true owner of the property?  The person who's name happens to be listed in the land records?  Or does substance over form suggest that an analysis of facts and circumstances can determine who the true equitable owner is regardless of the name used for bare legal title purposes?   The court has confirmed it is proper to consider substance over form.

 

 

As JofA said:

The court rejected both arguments, holding Njenge and Rachel were the equitable owners of the property since, from the date of acquisition, the taxpayers were the only ones who enjoyed the benefit and bore the burden of the home. Furthermore, the court found that the Camrock checking account was in essence the taxpayers' personal account.

This case illustrates that the economic substance rather than the legal form of a home ownership situation can dictate the tax result. In this case, it is important to note that the taxpayers prevailed because the evidence suggested that their son was owner in name only and that the "business," whose name was on the checking account used to make the housing payments, existed in name only.

Colin Cody, CPA

 

----- Original Message -----

From: Arnold M. Socol

To: taxchat@yahoogroups.com

Sent: Sunday, November 30, 2008 10:38 AM

Subject: Re: [taxchat] Equitable party

Robert that is the same conclusion we all arrived at last time.  So that's even more confirmation.  I actually used it for a client on the 2006 tax return. 

 

 

----- Original Message -----

From: Robert Lukey

To: taxchat@yahoogroups.com

Sent: 11/30/2008 10:31 AM

Subject: [taxchat] Equitable party

Several months ago it was asked if a relative could deduct the interest if they were making the mortgage payments. At that time the consensus was that only the mortgage/title holder could make the deduction. I was reading an excerpt this AM in the October Journal of Accountancy that described when another party could take the deduction. As I had taken the stand that a family member could since I had allowed the son, as one of my clients, to take the deduction this article makes me feel happier about my choice. My client like the party in the excerpt was the equitable party as they made the mortgage payments, paid the property tax and took care of the maintenance. In the excerpt the brother and sister-in-law were making the payments while the owner was the qualifier for the mortgage.

--
Robert Lukey EA CPA

Arnie Socol
President
Ways & Means, Inc.
845-562-6070

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