How to enter mortgage interest received from personal loan? Should I send borrower form 1098?

[Critter]

You are really splitting hairs ... either kind of interest is reported the exact same way on the Sch B with the name of the payer and the amount.  Don't worry so much, to the IRS income is income and they are just happy you report it.

[ibjoe]

I suppose.. but if claimed as "Seller Financed Loan" implies I sold a property (I did NOT) and IRS may wonder why that doesn't showing up on my tax forms? I don't want to file something that indicates I made some financial transaction that I didn't. I still wish I could find an official IRS statement that clarified this situation, but I think that simply claiming it on Sch B as interest income and identifying the borrower should be sufficient and not raise any IRS questions. Hopefully.

[Pankaj]

 I am doing my first WRAP mortgage interest income through my LLC. (The seller extends to the buyer a junior mortgage which wraps around and exists in addition to any superior mortgages already secured by the property)

My note servicing company issued 1099 INT which indicates interest income ($8K) which is higher than the actual interest income ($2K) received from the end buyer. It seems like note servicing company is most likely reporting underlying mortgage interest income ($6K). 

How do I report actual interest income ($2K) under Interest income? In other words, where can I deduct underlying mortgage interest income ( as an expense)?

Thank you in advance for your help. 

[Critter-3]

@Pankaj 

Answered in your other post.

[FAA1]

I understand that it is not necessary to give the payee a 1098, but is this a Capital Gain asset for me under Rev. Rule 64=162 since I am reporting the interest and principal pay back over 25 years?

.

[MarilynG1]

An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. You can read more about installment sales here. 

You can report part of your gain when you receive each payment, rather than all of your gain in the year of the sale. 

Here’s how to report one in TurboTax:

1. Open your return in TurboTax
2. In the search box, search for installment sales and select the Jump to link
3. Check the box next to Sales of real estate, cars, or anything else for which you receive payments over two or more tax years (installment sales). Select Continue
4. Answer Yes to Do you want to report an installment sale?
5. Follow the instructions to enter your sale details

Here's more info on Form 6562. 

@FAA1

[bluewaterbookkeeping66]

I have read all of the repy's and still don't have a straight answer. If a Property Investor finances a mortgage loan for an LLC who is also a Property Investor, what does the Interest get reported on......1098 or 1099 Int.?? And if not either one of these..... then what?

Thank you in advance,

[KrisD15]

The LLC, which pays the interest, would file Form 1099-INT showing the interest they paid. 

The LLC most likely claimed the interest as an expense.

The IRS wants forms filed that alert them of INCOME they should see reported on a tax return. When the LLC files Form 1099-INT, that form is letting the IRS know that the "Property Investor" should be reporting that amount as income for the same tax year.

The Property Investor will claim the interest on Schedule B.

Unless the LLC is a Sole Proprietorship, the Property Investor needn't file Form 1098. 

According to the IRS:

FORM 1099-INT "File Form 1099-INT, Interest Income, for each person:

To whom you paid amounts reportable in boxes 1, 3, or 8 of at least $10 (or at least $600 of interest paid in the course of your trade or business described in the instructions for Box 1. Interest Income , later);
For whom you withheld and paid any foreign tax on interest; or
From whom you withheld (and did not refund) any federal income tax under the backup withholding rules regardless of the amount of the payment."
 

FORM 1098 "You need not file Form 1098 for interest received from a corporation, partnership, trust, estate, association, or company (other than a sole proprietor) even if an individual is a co-borrower and all the trustees, beneficiaries, partners, members, or shareholders of the payer of record are individuals."

According to Investopedia:

"Interest income must be documented on Schedule B of IRS Form 1040."

@bluewaterbookkeeping66