Apologies, I was not clear in my question. My husband is acting like the bank, loaning his mother money through a mortgage, which is recorded on the title to her home. My question is when the house is sold at her death/or she chooses to sell, how we will, on our 1040, record this activity. Let's say the loan was $10,000; accrued interest is $5000 but the house sells at $11,000. Someone suggested we first have to recognize the $5000 interest, and then we have $6000 of return of principal and a loss of $4000 which we take $3000 a year until exhausted. Does this sound correct or do we record it like a stock sale: cost - proceeds = g/l?
