Hello,
I have borrowed against rental properties that I paid cash for and used the funds to buy other rental properties (and kept records as required by the Tracing rules). For example, I borrowed against property A (which I paid cash for) to buy properties B and C (which have no mortgage). How should I show the interest reported on form 1098 on Schedule E? My hunch is that the interest on the 1098 should be split between properties B and C (based on the tracing rules) - is this correct? Would splitting the interest on properties B and C cause questions with the IRS (do they allow you to split a 1098 this way)?
Thank you in advance for your response
