Discussion:Perhaps an easy rental refi question . . .

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Discussion Forum Index --> Basic Tax Questions --> Perhaps an easy rental refi question . . .


Discussion Forum Index --> Tax Questions --> Perhaps an easy rental refi question . . .

Kendrick (talk|edits) said:

1 April 2014
3 bro's put $100K in apiece and then they buy a $300K rental property and own it jointly, each putting a third of the income and expenses on their respective Schedules E.

2 years later, they get a loan on the property for $150K, and pay each of themselves $50K of the original $100K back.

Now they expect to deduct the mortgage interest against rental income.

Seems they may have a problem here. Does the tax law construe this as personal interest, and not deductible?

Terry Oraha (talk|edits) said:

1 April 2014
Research "debt financed distribution"

Ckenefick (talk|edits) said:

1 April 2014
Don't know if we can go by those rules given the Sch E reporting...

Terry Oraha (talk|edits) said:

1 April 2014
yep, I missed that part! that Sch E part.

PVVCPA (talk|edits) said:

April 1, 2014
Suggest they go back into the market for a new tax preparer. There are plenty out there that will not ask such ridiculous questions.

Kendrick (talk|edits) said:

1 April 2014
Hey PVVCPA. What is with your answer. You constipated or something? Just trying to get some help here.

Ckenefick (talk|edits) said:

1 April 2014
PVV was being sarcastic, implying that your question was a very good one, so good that a client/prospective client might not like the fact that you asked it, given the ramification of losing part of the deduction. As a result, client/prospective client might go find some chump accountant that will give him the full write-off, either because chump accountant doesn't know the rules or because chump accountant likes to bend the rules.

And yes, I think PVV has been in the bathroom all day long.

Kevinh5 (talk|edits) said:

1 April 2014
PVV's response was taken tongue in cheek by me, clearly with the understanding that you are a good preparer and others not willing to ask such questions are not as good. Back off a little, please, Kendrick. It's all good. Under the tracing rules, interest on the 150K is not deductible.
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