If the lender is subject to the mortgage interest reporting requirement, which of the following actions is NOT required?
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A. B. C. D.C
Under the Mortgage Interest Reporting requirements, the lender is required to report the amount of interest paid on a mortgage loan and points paid by the borrower to purchase or improve the property to the Internal Revenue Service (IRS) and to the borrower. The purpose of this requirement is to ensure accurate reporting of mortgage interest and to prevent tax evasion.
Let's review each answer option to determine which action is NOT required:
A. The lender must file an information return with the IRS. This statement is true. The lender must file an information return, specifically Form 1098, with the IRS to report the amount of mortgage interest and points paid by the borrower during the tax year.
B. The lender must report the amount of interest and points on the information return. This statement is true. The lender must report the amount of mortgage interest and points paid by the borrower on Form 1098.
C. The lender must report the loan balance as of December 31 of the year preceding the year the report is filed. This statement is not true. The lender is not required to report the loan balance on Form 1098. However, the borrower may be able to deduct the interest paid on a mortgage loan, up to certain limits, on their tax return. The amount of the deduction is based on the loan balance, among other factors.
D. The lender must send a statement to the borrower. This statement is true. The lender must send a copy of Form 1098 to the borrower by January 31st of the year following the tax year in which the interest and points were paid.
Therefore, the correct answer is C. The lender is not required to report the loan balance as of December 31 of the year preceding the year the report is filed on Form 1098.