Legal Question in Business Law in Massachusetts

My question is does interest paid/received on a Commercial Promissory note work like a mortgage and decrease through the years?

I am a tax preparer who has a client who has a Commercial Promissory Note for 22 years fixed rate of 6.25%, seller funded. The loan amount is $660,000. Monthly payment is 4606.32. The interest they receive needs to be included on their tax return.

I am going on the premise that this works same as a mortgage loan because wording reads: "each monthly payment will be applied to interest before principal." Am I correct?

Thank you!

Asked on 5/11/22, 6:36 am

1 Answer from Attorneys

Lawrence Graves Coolidge & Graves PLLC

As with any inquiries about the provisions of a legal document, the only possible answer is to examine it. One might well assume from the fixed monthly payment that there is an amortization schedule akin to what one would find in a mortgage, wherein the monthly interest/principal components are identified, but even in that situation one must ascertain the point in the amortization to determine the interest component of the payments within any given tax year. First step, get the document.



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Answered on 5/11/22, 7:20 am

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