How do I report interest and P&L from notes on 1120?

[Alex Stepanov]

Hello Everyone,

Could anyone please help me understand how mortgage notes are accounted and reported for the purpose of business tax return (form 1120) ? While searching the Net, I found a few different approaches - from treating them as "stocks" to OIDs to crazy complex deemed exchange schemes and pretty much everything in between.

My question is to those who have done it themselves: how did you do it? I am specifically interested in figuring the business tax return part. Any help is greatly appreciated!

Cheers

Alex

[Ashish Acharya]

@Alex Stepanov , 

Mortgages go line 20 of both  1120s and 1120. Just putting mortgage there is not enough. You must balance the asset and total liabilities and equity. 

You shouldn't be preparing this if you had to ask that question. 

Are you holding RE in C-crop? I dont know you business activities but you might have disadvantageous entity structure. 

Please talk to your CPA or lawyer. This might be costing you a great deal of money. 

Good luck.