Actions Subjecting Lenders to Mortgage Interest Reporting Requirements

A

The correct answer is C. The lender receives at least $500 in interest on a mortgage loan during a calendar year.

Under the Mortgage Interest Reporting requirements of the Internal Revenue Code, mortgage lenders are required to report certain information about mortgage interest paid by borrowers. This information includes the name, address, and taxpayer identification number of the borrower, as well as the amount of interest paid on the mortgage loan.

The reporting requirement applies to any lender who receives at least $600 in mortgage interest from a borrower in a calendar year. However, the lender must begin reporting the interest paid once it reaches $500, as the reporting threshold is based on the amount of interest paid, not received.

Option A, holding mortgage loans in the course of trade or business, does not by itself trigger the mortgage interest reporting requirement. Lenders are typically in the business of originating and servicing mortgage loans, so holding such loans is a normal part of their business activities.

Option B, being a qualified FHA or VA lender, does not by itself trigger the mortgage interest reporting requirement either. However, if a lender meets the $500 reporting threshold based on interest received from borrowers, it must report the interest paid regardless of whether it is a qualified FHA or VA lender.

Option D, offering unsecured home improvement loans, is not relevant to the mortgage interest reporting requirement. Mortgage interest reporting requirements only apply to interest paid on mortgage loans secured by real property.

In summary, the correct answer is C. A lender is subject to mortgage interest reporting requirements if it receives at least $500 in interest on a mortgage loan during a calendar year, regardless of whether it is a qualified FHA or VA lender, holds mortgage loans in the course of trade or business, or offers unsecured home improvement loans.