Legal Question in Tax Law in New Mexico

My father wants to pay off my brothers mortgage and then assume the mortgage himself. My father will file a mortgage on the property in the county clerk office and all transactions will be worked thru an escrow company. My father will pay taxes on the interest received and my brother will claim the interest paid as a deduction. Is there a minimum interest rate my father must charge my brother?


Asked on 1/16/12, 4:13 pm

1 Answer from Attorneys
Charles Aspinwall Charles S. Aspinwall, J.D., LLC

Yes. In order for the transaction to be treated as an arm's-length deal, interest must be charged. Otherwise the IRS will view it as a gift and taxes may be due. In today's market a 20 year fixed loan bears interest at about 4%, but the rate changes so do a current check when the deal is inked.

Read more
Answered on 1/17/12, 12:55 pm


Related Questions & Answers

More Tax and Taxation Law questions and answers in New Mexico