Hi TomD8, hope you are well. I read your responses to the original poster as well as the IRS letter from the link you provided. The IRS letter, written in legal speak, from what I gather discusses an agent issuing a closing cost credit to their client. The agent isn't obligated to issue a 1099 to the client, the IRS treats the closing credit as a reduction in the basis of the home. The credit issued by the agent can be treated as a business expense offsetting their 1099 income.
My question as the original posters as well, if I were to do this for myself, I am issuing the credit to myself, wouldn't the expense be considered a personal expense and therefore not deductible from the 1099 income? I can't find anything in the tax code about this but from a general rule it would seem to be a personal expense.
Do you have anything additional you can provide on this as to why the IRS would allow you to treat yourself as a client and consider it an expense and reduce the basis in the home vs keeping it as taxable income. Any guidance would be appreciated because there is obviously a significant benefit to being able to reduce the basis.
Thank you in advance for your help.
