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Real Estate d
Eileen M. Day REALTOR
LENDING DEPOSIT TO CHILD
QUESTION: My husband and I want to lend money to our son and daughter-in-law to help them buy a house. Are tttere any tax Implications that we should Know about?
ANSWER: Yes. Make sure that your son and daughter-in-law can deduct the Interest they pay you. You can do this by hiring a lawyer to draft a mortgage agreement Drawing up a simple I.O.U. Instead of a mortgage will not suffice. The reason for this is that Interest on a mortgage secured by a principal residence is fully tax deductible. Interest on a personal loan Is not.
If you charge your son and daughter-in-law the fair market Interest rate calculated monthly by the IRS. they will be able to deduct the Interest they pay from their taxable Income. Of course, you must report the Interest YOU collect as taxable Income.
The rules are. much more complex If you loan children more than *10.000 and charge a be low-market Interest rate or none at all. so consult an accountant If this Is your Intention.
If there Is anything we can do to help you In the field of real estate please stop In at EILEEN M. DAY. Realtor, the Clopton House. Washington. Va. 22747. Phone 075-3053. We re here to help.
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