Mortgage interest tax question

[Binyamin Pinhas]

My partner and I are closing on our first home and I have come across a question for tax purposes. Originally, we wanted to purchase the home in an LLC, however, the the rate would have been substantially higher. It would have still been profitable, but we attempted to close on several homes and we kept getting rejected because the mortgage broker needed 60 days instead of 30 to get the loan closed. This is because as a first time home buyer you need an exemption to purchase in an LLC.

So we changed strategies. We are getting the loan in our own names (putting in the title in our own names) and will transfer it later on. I understand there is a risk that the bank can force a refi because we are not supposed to transfer title to an LLC. However, it looks as if this is the only way we will be able to close on a home and it also makes the interest rate substantially better.

The question I have is that the Form 1098 that has the interest deduction will have my name and my social instead of the LLCs name and EIN. The mortgage broker stated that because the loan is in our names the 1098 will be in our names. The approach I am thinking of taking is to not take the deduction on our personal returns. But rather, to take it on the 1065 for the LLC partnership return. This way it will flow through to our personal returns. Ultimately, it is the same result, however, I would like to know if this is something anyone has come across before.

Specifically, if anyone had taken my approach and has been challenged by the IRS. Thank you.