Is trustee required to report interest on 1098 form?

[Guest Phil L]

The instructions to the IRS form 1098 says that a 1098 form must be filed to report home mortgage interest received, but only if the person or entity receiving the mortgage interest is received in the course of your trade or business.

Is the trustee of a tax qualified 401(k) trust requried to file a 1098 form if at least $600 of mortgage interest is received during the year? Is there any cite on this?

Thanks.

[Guest]

Are you saying the 401(k) invests in home mortgages directly? If so, then they wouldn't be exempt from filing the form. But I wonder if that's a prudent investment for a pension plan, since you can buy funds that invest in these and diversify the risk.

[Guest Phil L]

No, this is a regular old run of the mill participant loan used for the purchase of his principal residence. He repays the loan to his account balance in the profit-sharing / 401(k) plan.

[Fredman]

This really doesn't answer the question, but we file a 1098 for a couple of P loans.

According to IRC 72(p)(3) deductions are disallowed if the loan is made to a key employee OR the loan is secured by elective deferrals (we take the conservative road, so if any part of a loan is secured by elective deferrals then its not deductible).

You can also read PLR 893018 & PLR 8742025. Letter 893018 sez that its ok to deduct the interest as long as its not disallowed under 72(p)(3) and the loan is secured by the residence.

Those sites should serve as proof that you CAN deduct interst. I haven't found anything regarding the filing of Form 1098. Even if a 1098 isn't filed, a P should still be able to prove to the IRS all of the above and deduct. It wouldn't surprise me if a Trustee refused to file the 1098 due to administration headaches.

I used Sal Tripodi's "ERISA Outline Book" while researching this question.

[NNichols]

from Yahoo groups Tax professional;s

"... we file a 1098 for a couple of P loans.

According to IRC 72(p)(3) deductions are disallowed if the loan is ...secured by elective deferrals (we take the conservative road, so if any part of a loan is secured by elective deferrals then its not deductible).

You can also read PLR 893018 & PLR 8742025. Letter 893018 sez that its ok to deduct the interest as long as its not disallowed under 72(p)(3) and the loan is secured by the residence.

Those sites should serve as proof that you CAN deduct interest. I haven't found anything regarding the filing of Form 1098. Even if a 1098 isn't filed, a P should still be able to prove to the IRS all of the above and deduct. It wouldn't surprise me if a Trustee refused to file the 1098 due to administration headaches.

I used Sal Tripodi's "ERISA Outline Book" while researching this question. "

So if I pay in non deductible interest is it non taxable when it comes out?

Noel Nichols

Chenango Business Services