I bought a two family house and then decided to renovate it. My father loaned me about 130K so far. He is borrowing the money fully from a HELOC on his house to fund us. He has some cash on hand but in order to not have to deal with the rules about discounted loans all the funds he gave us come right from the heloc. He gets an intesest statement monthly, I pay it. My interest paid matches exactly what HIS 1099 from HELOC states. Since we are in paying the interest on the HELOC right from the statments this is a market rate loan.. No special deals for me :) I think I need to 1099 him as when we sell I want to include this cost in our interest expenses. My thought is I need to 1099 him for the interest we paid him, he then puts that on his return as income against the interest he paid that is shown on his 1099 from the bank that underwrote the HELOC.. That would make it a net zero transaction for him and we would still have a 1099 to clain the interest expense ourselves. Is that right? Is there something I am missing. I tried searching all over the internet and there is a lot of information on family loans at no interest but I couldnt find anything on family loans where the family member in-turn re-borrows the money.
- posted
17 years ago
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