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Lane
Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3647
Experience:  Providing Financial & Tax advice since 1986
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My sister passed away in 2010, I paid to get her house out

Resolved Question:

My sister passed away in 2010, I paid to get her house out of foreclosure last year and I now live in it. I remodeled the house , putting in new carpet , windows , energy efficacy appliances, now my question is may I take credit on my income tax. I live in Texas if that makes a difference. The home loan is still under the the Estate of Sharon Booth.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

hi i can help with this ...

Customer:

what advice can you give me?

NPVAdvisor :

There IS legal precedent for your taking the deduction when you have all the rights, privileges and duties of ownership

NPVAdvisor :

If you can hang on I'm trying to find the citation

NPVAdvisor :

are you the exector and has the estate been probated?

Customer:

Yes to both questions

NPVAdvisor :

OH, you are on title? much simpler

Customer:

no I am not on the title, tried to get title in my name right after my sister passed but my lawyer did not think it was a good idea

NPVAdvisor :

That doesn't make sense ... probate is the process where title is changed .... probate actually comes from the Latin, to prove (who ownes)

Customer:

He told me that if I did put the house in my name then the other debts that my sister owed would become mine

NPVAdvisor :

You might want to talk to another atty. One of the other things that happens in probate is the estate is announced in the newspaper, so that all creditors can come against the estate .... but once the probate court seals the estate (closes the probate estate) its all over

Customer:

He told me that it might take four years for the probate to be over

NPVAdvisor :

Ahhh, so it's not been probated

NPVAdvisor :

SO, we still may be back where I was heading .... There was an article in the Journal of accountancy by a tax attorney talking about the concept (not substantial title, not effective title), but something to that effect. I showed it to a RE attorney and he said he'd never hear of it, but has since used it

NPVAdvisor :

Tell you what, I could opt out, and have it moved to the Real Estate Law category, but quite honestly you may noy have much luck

NPVAdvisor :

OR

NPVAdvisor :

I can switch to the question and answer mode and if you'll give me a couple of hours (I actually have an online lawschool class tonight) I can have an answer for you before morning

NPVAdvisor :

...startes at 8:45 (eastern here)

NPVAdvisor :

I guarantee I can find it and youn would fall very directly into that definition .... you do pay the mortgage right?

NPVAdvisor :

and you have all the rights and duties of ownership?

Customer:

Yes I pay the mortgage, and yes both of my brothers has said the house is mine as far as they are concerned

NPVAdvisor :

By the way the whole point was that the person in the example DID get to deduct the interest .... There was a letter that had to be written and some other documentation, but knowing I i know about property law, it's conceptually sound

NPVAdvisor :

Want to hang with me for a couple of hours on this?

Customer:

yes I will wait to hear from you, thanks

NPVAdvisor :

Ok, I'll switch to the Q&A mode, but don't rate, just check back on this page: gotta go (FOR NOW)

Expert:  Lane replied 1 year ago.
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Expert:  Lane replied 1 year ago.


One follow-up ... this is not adverse possession (that might be possible later).

The statute of limitations for your state must pass before that can work (might be what your attorney is thinking, for later).

This is another legal concept that has to do with ALREADY, NOW having the rights and duties of ownership and no one else making a claim of ownership ... but again, much too soon for Adverse Possession.

Hang with me. We'll get there

Lane

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3647
Experience: Providing Financial & Tax advice since 1986
Lane and 4 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Hi,

Still in class but found the code itself on this.


SO, you have BOTH (1)the first sentence in paragraph(b) of Sec. 1.163-1 AND the tax court decision.


You are the equitable owner and can and should deduct the interest.


http://www.taxalmanac.org/index.php/Reg._1.163-1

Lane
Expert:  Lane replied 1 year ago.

 

 

 

Hi Sheila

 

 

,... Just checking back in to see if you saw that I DID find the answer.

 

 

 

You have what's called "EQUITABLE OWNERSHIP."

 

 

 

The Internal Revenue Code says, in section 1.163-1, paragraph (b) , that you may deduct the interest on the house, in your situation.

 

 

 

Further there has been a US Tax Court decision supporting and upholding the law.

 

 

 

Deduct the interest on your schedule A, form 1040, as an itemized deduction.

 

 

 

 

 

 

 

Hope this helps,

 

Lane

 

 

 

Your positive feedback (an OK or better) or "Accepting" the question is the only way JustAnswer pays us for our time and expertise.

 

BUT, if you have questions, or need to reference the information, come back here.

 

 

Expert:  Lane replied 1 year ago.
Hi Shelia,


I'm just following up with you to see how everything is going. Did my answer help?


Let me know,
Lane
Expert:  Lane replied 1 year ago.
Just checking back in one more more time, Shelia.

...wanted to make sure you saw the answer.

You DO get to deduct the mortgage interest.

If you need clarification, come back here.

Otherwise, positive feedback or an accept would be appreciated.

...remember the term EQUITABLE OWNERSHIP.

Lane

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