Interest on real estate loans

From the 2024 DOR Tax Exemption Study

Det. No. 01-039, 20 WTD 520 (2001) 521 In January 2000, the taxpayer moved from the property, and beginning that month the friend made the mortgage payments out of the friend’s own funds. Shortly thereafter, the friend wanted to refinance the loan to take advantage of low interest rates, and asked the taxpayer to quitclaim his interest in the property to the friend. The taxpayer agreed to quitclaim his interest on condition the taxpayer’s name would not be on the new loan documents. The friend agreed to that. In early March 2000, the taxpayer quitclaimed his interest to the friend, and the friend refinanced the purchase of the real estate in the friend’s name only. The quitclaim deed the taxpayer signed was prepared by the escrow company as part of the refinancing transaction. The quitclaim and the loan documents were signed on the same day. The taxpayer received nothing in exchange for signing the quitclaim, other than being relieved from liability on the loan obligation. The taxpayer considers the transfer to be a gift to the friend of the taxpayer’s interest in the real property. At the time of the quitclaim/refinancing transaction, the taxpayer was charged REET of $. . . on the