Another tax question - where to put interest received?
In 2009, we loaned a friend $45,000 to pay off her cousin for her portion of the purchase of waterfront property on Whidbey Island, WA which adjoins another family-owned property. Her cousin refinanced his home 7 years ago with a balloon to pay cash for the property and it was time to pay him off. I approached her about loaning the money because CD rates are so low.
The money we loaned her is secured by her primary residence which has plently of equity ($180,000) even in today's market. All the paperwork was completed by a lawyer, recorded and is official.
I'm thinking the interest she paid us belongs on Schedule B but TaxAct is looking for me to enter the amount via a 1099-INT, 1099-OID, K-1 or as a seller-financed mortgage. I'm guessing I should use the seller financed mortgage form as it will get the required info onto Schedule B.
I will send her a report of how much interest she paid which I assume she will put on her Schedule A, Line 11, "Home mortgage interest not reported to you on Form 1098."
Does that sound right?