@FuzzBuzz wrote:
My friend passed away. He left everything he had to me. I’m the Administrator, executorand the benefactor of his estate. I a sense, I am him.
The bank refused to send me a 1098 mortgage interest statement because the original owner of the loan passed away. They said the IRS doesn’t require them to do so. Is this true? I paid the loan on time for six years at a whopping 12.5% interest.
You probably need legal and tax help from a competent estate law attorney and a competent accountant.
This is what should have happened:
When your friend passed away, you go to court to present the will for probate and be named the administrator or executor of the estate. You file a final tax return for your friend (as your friend's administrator) that reports all his income and deductions up until the day he died. If your friend had income after he died, that income is paid to his estate, which is a different legal and tax entity from your friend, and files a separate estate tax return if it has taxable income.
You don't pay one dime for the house from your own funds, ever, until the probate is closed and the home is transferred into your name. The bank will most certainly require you to refinance the home or assume the mortgage, since they can't lend money to a deceased person. If you need to make mortgage or property tax payments while the probate is pending, you make the payments from your friend's estate -- his assets -- bank accounts and so on.
If you are the only heir, then when probate is closed you inherit the home, the remaining balance in the bank accounts, and any other property according to the will or the laws of your state.
Mortgage interest and property taxes you pay after probate is closed, when the house is legally titled in your name, are deductible by you. If the mortgage is still in your friend's name at that point, something has gone very wrong in the process, because the lender should not allow the home to be transferred without the prior mortgage being paid off, refinanced, or assumed.
Mortgage interest and property taxes you paid while your friend was alive, or after your friend died but the house was still in his name, are not deductible by you under the law. You might be able to make the argument under the "equitable ownership" principles discussed at the top of this thread, but that means claiming the expenses and going through an audit. And the bank is under no obligation to give you tax documents in your friend's name. The bank may be required to give the tax documents to you in your role as administrator of the estate, but that would be for purposes of preparing your friend's final tax return and any estate tax returns, not so you could claim the interest that was paid in your friend's name.
If the loan and house are still in your friend's name and probate was not completed properly, you need legal help ASAP.
