Using partner's IP equity to buy in your name

Say Marge has an IP with equity solely in her name.
Homer wants to buy an IP in the same state as Marge, but solely in his name to avoid land tax.

Homer directly borrows 80% secured against the new purchase, but wants to draw 20% from Marge's IP's equity to pay the deposit.

Is this feasible? If so, who would be claiming the interest deductions on the 20%? (It's a top of Marge's loan, but used for Homer's IP)

 

Don't do the equity release as a top up of Marges loan, do it as a separate account. That way you know what money has been used for what property. It might need to be in joint names (but Marge remains the sole owner of her property).

 

If the 20% isn't a top up, but a split on Marge's loan - and Homer uses it to buy the property solely in his name - then who is able to claim interest deductions?

I guess the 20% loan under Marge's name but would she be able to claim interest for the property purchase that's not in her name? And vice versa for Homer.

 

no one

But if Marge enters an arms length written loan agreement charging Homer interest then Homer will be able to claim this interest.

 

I guess that defeats the purpose then. The interest paid to the bank can't be deductible.

 

Looking at this tip by you terry:
Tax Tip 335: Spouses Jointly Borrowing and Deductibility of Interest

The way to do it would be: Homer and Marge co-borrow to buy the IP. But buy the property solely in Homer's name.

But I guess in this, there's no way for Homer to be a co-borrower of the 20% equity release from Marge's IP.

 

My post didn't say this

 

Tax Tip 340: Borrowing When the Money will be Used by Someone Else Tax Tip 340: Borrowing When the Money will be Used by Someone Else

 

Thanks Terry. Would need to keep a close eye to match the interest payments between Homer & Marge to the Bank and Marge.

I'm wondering if there would be some way just to get Homer's name on Marge's equity release

 

this shouldnt be the case.

Homer could just be a co-borrower