How Would You Structure This For Tax Purposes? - Posted by John Bryce
Posted by John Bryce on March 25, 2006 at 10:33:59:
I am getting ready to purchase a house and vacant lot for $40,000 using funds from a HELOC secured by an investment property that I own.The IRS is very strict on how the interest from this type of HELOC can be deducted,so it’s strictly going to be used for expenses that qualify for and interest deduction,to prevent confusion come tax time.Other expenses related to the closing will be paid from my checking account.
Here’s where it get’s tricky…Two lots are involved,lot 1 has the house and lot 2 has the septic system.I would like these on two separate HUD statements.If I ever decide to place a septic system on lot 1 and sell lot 2,it will clearly show the basis for the two parcels.I feel like it’s an accessory to lot 1,because it supports the septic system.
Can I deduct the interest from the purchase of lot 2 on my schedule E?If not,the value of the property could support a purchase of the house for $35,000 and the lot for $5,000 if I need to play with the numbers.
Any help would be appreciated…