Bought a property Land installment/contract for deed.. How do I deal with 1098-int

[Justin Summers]

So, my mother bought 2 properties land installment about 10 years ago. The title is in her name but the loan is in the prior owner's name. The bank sends the 1098-int for yearly interest paid to the Prior owners and then my Mother deducts that amount on her Schedule E but doing it this way could throw a flag up with the IRS computers since there is not 1098-int in her name (Even though she is paying the payment to the bank each month)    This hasn't been problem in the past but I'm worried about the future with her claiming the mortgage interest without a 1098.. Can the prior owner nominate my mother as the payor of the interest? or issue another 1098 to my mother? How would this a handled on their tax return? 

Thanks for any input

[Chris Seveney]

Quote from @Justin Summers:

So, my mother bought 2 properties land installment about 10 years ago. The title is in her name but the loan is in the prior owner's name. The bank sends the 1098-int for yearly interest paid to the Prior owners and then my Mother deducts that amount on her Schedule E but doing it this way could throw a flag up with the IRS computers since there is not 1098-int in her name (Even though she is paying the payment to the bank each month)    This hasn't been problem in the past but I'm worried about the future with her claiming the mortgage interest without a 1098.. Can the prior owner nominate my mother as the payor of the interest? or issue another 1098 to my mother? How would this a handled on their tax return? 

Thanks for any input

The prior owner hopefully is not claiming it also on their return since they are not paying it. If the CFD is recorded and you have a contract there is no reason even without a 1098 you cannot deduct it, if it is questioned you have the backup / data.

Also ifyou have a CFD, the proper way is to have a third party servicer servicing the loan as the servicer (who in this case is the owner) is required to send a 1098 but it seems like they are not.