Mortgage Interest Question

Comments(7)

• 
  DaveT9th April, 2004

  I hope you really mean that you are transferring real estate held in your name to your LLC.
  
  Otherwise, there is no interest deduction for personal property (for example, your car payment is not deductible).
  
  If I am right, and you just misspoke, how is your LLC (being) organized?

• 
  robinvestor9th April, 2004

  The LLC was formed as a partnership and yes I did mean that I was transferring property I owned personally into my LLC

• 
  DaveT14th April, 2004

  Yes, take the mortgage interest deduction on your partnership return.

• 
  smithj214th April, 2004

  Dave,
  
  I was not very clear on the response that you gave. I understood your response to mean that if you quit claim your real estate (not a car) into an LLC and the mortagage is still in your name, You can still take the mortgage interest deductions when you itemize deductions at tax time.
  Am I interpreting this right?
  
  Thanks,
  JS.

• 
  DaveT14th April, 2004

  You are making a tax free contribution of your real estate to your partnership. I assume that your partnership is also taking over the mortgage payments, and will take a business interest deduction on your Form 1065.
  
  Even though the mortgage is in your name, you are a partner, and all of the partnership income will still flow through to your personal 1040. If you feel more comfortable, have the partnership refinance the property and payoff the mortgage loan that is in your name. You as a partner may still be asked to personally guarantee the loan, which will essentially put you back in the same position you are in now.
  
  Just my opinion. I am not well versed in partnership tax returns, so it may be best for you to resolve all your questions concerning the partnership tax treatment with a licensed tax professional.

• 
  Erick18th April, 2004

  I don't have the page numbers but look through IRS publications #535 Business Expenses and #541 Partnerships. They both address your question about the deductibility of the mortgage interest expense.
  Let us know what you find.
  
  PS: In addition to the above, you should be familiar with IRS pub #527 as well.

• 
  myfrogger18th April, 2004

  Your entity is certainly entitled to pay for a business expense. In essence your entity bought the property SUB2 the existing mortgage on the property. Your entity is paying the mortgage now and is entitled to receive deprecation, mortgage interest expense deductions, etc.
  
  I would also recommend using a warranty deed instead of a quit claim deed.