Legal Question in Tax Law in California

Rental Property is not Rental Anymore

In 2001 my husband and I bought a 2nd house and rented it to our daughter. We claimed it as a rental on our taxes. In 2004 we refinanced the home loan and our daughter got her name on the loan. We are allowing her to use all the interest on the loan for her taxes since she pays the home loan. We aren't claiming any part of that home and treating it as if it is her home 100%. Since all 3 of us are on the loan, how do we inform the IRS of this? We did have a rental and now we do not, yet we did not sell it.


Asked on 2/04/05, 10:36 am

1 Answer from Attorneys
Donald Field Donald L. Field, Jr., Attorney at Law

Re: Rental Property is not Rental Anymore

Allowing your daughter to take the full interest deduction may be permissable if she is making all of the mortgage payments and if she is an owner of the property. If she is not an owner, then the property should most likely continue to be treated as a rental, the mortgage payment treated as if it were paid to you as rent (and as if you had paid the mortgage). In that case you must deduct the interest (and other expenses) from rental income on your return.

Consult a local CPA or your tax return preparer for more information regarding how to report this on tax returns.

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Answered on 2/05/05, 7:04 pm


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