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Eileen M. Day mmltoh
REPORTING INTEREST INCOME
You sold your home and helped the buyer finance it by giving him a second mortgage. The mortgage included monthly payments of both principal and interest. How does this effect your income for tax purposes?
Naturally, the repayment of principal is not income, it is the return of money yoti loaned. However, the interest portion of the payment check IS income and must be reported as taxable income.
Sometimes, lenders “forget” to report this interest income and get a nasty letter from the IRS, not only charging them for the unreported income but with a penalty taxed on for good measure. How does the IRS find out? Simple!
There are two halves to every loan. The borrower and the loaner. In order to get a tax deduction for the interest payment, the borrower must report all interest paid on first and second mortgages (and every other loan, for that matter). Under new IRS regulations, a borrower must identify individuals, such as home sellers (as well as banks) who give mortgage assistance.
If there is anything we can do to help you in the field of real estate, please phone or drop in at EILEEN M. DAY, Realtor, The Clopton House, Washington, VA. 22747. Phone: 6753400. We’re here to help.
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