For a U.S. bank with domestic and foreign locations, which transaction does NOT require an information return to report the amount of interest paid?
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A. B. C. D.C
Under the Internal Revenue Code (IRC), certain transactions require a financial institution to file an information return with the Internal Revenue Service (IRS) to report the amount of interest paid to the recipient. The form used to report this information is Form 1099-INT. Generally, a financial institution must file a Form 1099-INT for each person to whom it has paid at least $10 of interest during the year.
However, there are some exceptions to this rule, and certain transactions do not require a financial institution to file a Form 1099-INT. To determine which transaction does not require an information return to report the amount of interest paid, we need to analyze each option:
Option A: A loan made to James Roberts, a U.S. resident, payable at the bank's New York office, to purchase securities secured by the borrower's home in Mexico.
This loan is made to a U.S. resident, and the interest is payable at the bank's New York office. However, the loan is secured by securities purchased with the loan proceeds and secured by the borrower's home in Mexico. According to the IRC, interest paid on loans secured by real property located outside the United States is not subject to information reporting requirements. Therefore, this transaction does not require an information return to report the amount of interest paid.
Option B: A loan made to Robert and Louise LeBlanc, who are resident aliens, payable at the bank's New York office, secured by a piece of real property located in Canada.
This loan is made to resident aliens, and the interest is payable at the bank's New York office. However, the loan is secured by a piece of real property located in Canada. According to the IRC, interest paid on loans secured by real property located outside the United States is not subject to information reporting requirements. Therefore, this transaction does not require an information return to report the amount of interest paid.
Option C: A loan made to Smith and Withers, a partnership formed for the practice of law, located in the United States, payable at the bank's New York office, guaranteed by Mr. Smith and Mr. Withers, and secured by the law firm's office building.
This loan is made to a U.S. partnership, and the interest is payable at the bank's New York office. The loan is guaranteed by the partners and secured by the law firm's office building. According to the IRC, interest paid on loans made to partnerships is subject to information reporting requirements. Therefore, this transaction requires an information return to report the amount of interest paid.
Option D: A loan made by Mrs. West, a U.S. citizen, to purchase a mobile home and the lot on which it will be placed; both the mobile home and lot are located in the United States.
This loan is made to a U.S. citizen, and the interest is payable on a loan secured by a mobile home and lot located in the United States. According to the IRC, interest paid on loans secured by personal property, such as a mobile home, is not subject to information reporting requirements. Therefore, this transaction does not require an information return to report the amount of interest paid.
In conclusion, the transaction that does NOT require an information return to report the amount of interest paid is Option A: a loan made to James Roberts, a U.S. resident, payable at the bank's New York office, to purchase securities secured by the borrower's home in Mexico.