Question

Because Scott is three months delinquent on the mortgage payments for his personal residence, Jeanette (his sister) is going to cover the arrearage. Based on past experience, she does not expect to be repaid by Scott. Which of the following statements is correct?

a.if Scott receives the money from Jeanette and pays the mortgage company, Jeanette can deduct the interest part. b.if Jeanette pays the mortgage company directly, neither Scott nor Jeanette can deduct the interest part.

c.if Jeanette pays the mortgage company directly, she cannot deduct the interest part.

d. Only b. and c. are correct.

Answer 1

The correct statement is d. Only b. and c. are correct. Jeanette cannot deduct the interest part of the mortgage payment she makes on behalf of Scott because she does not have ownership interest in the property. The correct option is D.

Step-by-step explanation:

The correct answer to the question is: d. Only b. and c. are correct. This is because in the context of IRS rules regarding mortgage interest deductions, the person making the payment must have an ownership interest in the property to claim the deduction.

Therefore, if Jeanette pays the mortgage company directly, Scott cannot deduct the interest part because he did not make the payment, and Jeanette cannot deduct the interest part because she does not own the property. This exclusion applies regardless of whether or not they expect repayment of the mortgage arrearage.

It is important for taxpayers to understand these mortgage interest deduction rules, as they help in managing finances and potential tax benefits related to homeownership and mortgage payments.