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If I take a loan for investment property to buy a house, can

I treat is as 2nd...
If I take a loan for investment property to buy a house, can I treat is as 2nd home for tax purpose? Does the bank issue a different kind of 1099 for investment property loan?
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Answered in 8 minutes by:
11/2/2012
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Your bank will issue the same 1098 for an investment property loan as they do for your primary residence loan. If your loan is for the purchase of an investment property, you can deduct your interest on Schedule E. If the second property is a second home, you can add that interest on to your Schedule A itemized deductions.

Based on your question, I think the Schedule E treatment is most appropriate. It's still deductible, and the end result will be the same.

Thanks for using JustAnswer

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Customer reply replied 5 years ago

But if I do claim the interest on Schedule A, is there anything legally wrong?

If the interest is for the investment property, it should be on Schedule E. You won't get into any trouble for placing on schedule A, but in the event of an audit the IRS could disallow the deduction on Schedule A. If schedule A is the only schedule under audit (the IRS usually targets their audit to one area) then they don't have to take an amended return for you to place the interest in the right bucket.

So the worst case scenario would be the IRS disallows the deduction during an audit.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid, but the Web site will still collect your payment. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Customer reply replied 5 years ago

My intent is to get a 2nd home but can't qualify for the regular residence loan. The loan officer suggest that I qualify for an investment loan. I won't rent the house and it's truly my 2nd home. Suppose I get audited, is it something IRS will accept?

With that information, yes - because it is truly a second home. The IRS doesn't keep track of the "type" of loan you have. The bank is giving you an "investment" loan, but really it's all just semantics. The IRS wouldn't say anything. They would, however, if you were using it as a rental but tried to treat it like a second home.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid, but the Web site will still collect your payment. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
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Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Customer reply replied 5 years ago

Hi, I do have another question. I may receive a gift from a foreign national in foreign currency equivalent to over $100,000 in a foreign bank. I may have part of this money exchange to US $ and move it to a US bank. I know for that gift, I have to file form 3520, and for the money in a foreign bank I have to file TD F90. Is there any other form I need to file?

No, those two forms should be all that you need. You simply need to disclose the transaction. No tax will be due.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid, but the Web site will still collect your payment. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Customer reply replied 5 years ago

How do I report the amount on TD F90 if in the middle of the year I move some of that money out to a US bank? Do I report the highest amount or do I report the amount on 12-31-xx? Also, do I need to estimate the earnings and report it somewhere?

On the TD F 90-22.1 you will fill out the balance when the account was at its highest, that is you report the most that you had at any one time.
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Customer reply replied 5 years ago

Another related issue is that when I move the money from the foreign bank to a us bank, due to the foreign country currency control policy, it's possible that there will be 4 or more cashier checks with different remitters. But the money actually is from one person. Do I report on 3520 as one gift or 4 seperate gifts?

If the money is from one person, then you report it as one gift.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid, but the Web site will still collect your payment. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified
Megan C and 87 other Tax Specialists are ready to help you
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Thank you for the positive rating. Please remember me the next time you have a financial question. Simply enter "MyVirtualCPA" in the subject of your question, and it will be routed directly to me. Thank you again for using JustAnswer
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Megan C
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