Mortgage Interest Question

[ccordray]

What is the name of your state (only U.S. law)? Nevada

My wife and I live in a house in which the loan is in my grandmother's name. We reported the interest paid on this loan on our taxes, as we are the ones that have been making the mortgage payments since the purchase in October 2006. We recently received a notice(notice CP2000) from the IRS stating that the mortgage interest deduction on our 2007 return doesn't match their records. The discrepancy is the mortgage interest for the loan on our house that is technically in my grandmother's name.

The IRS is requesting we return the response form. This form has 3 options: 1) That we agree with all changes to the return, 2) That we don't agree with some of the changes, or 3) That we don't agree with any of the changes. Options 2 & 3 are asking for documentation to support the entries on the original return.

What type of documentation could we provide to show that we are making the mortgage payments and that the mortgage interest deduction should be allowed?

 

[tranquility]

You must *both* make the payments and be responsible for them. I suggest, from your post, you choose "agree with changes". Otherwise, you need to see a tax professional who will make an equitable responsibility claim. Not easy, not the basic law, hard claim. One you won't be able to do on yourself.

 

[Some Random Guy]

Publication 936 (2008), Home Mortgage Interest Deduction

You must have an interest in the home and you must be legally obligated to pay the mortgage in order to claim the mortgage interest deduction.

Based on the facts you gave, the IRS considers your payment of her mortgage interest to be rent.

 

[davew128]

To add some fuel to the fire, it's not exactly certain that an equitable responsibility claim is in order here. Going down that path would have to have facts that show "but for the credit unworthiness of the taxpayer" the loan would have been in their name, and presumably the deed as well. The OP's facts don't necessarily fit those criteria or at least not enough info was given to support it.