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<<<<You then claim depreciation on that part of the home that Dad uses, which cleans up the rental income tax consequence that you otherwise would have, and Dad avoids the interest income tax by (perhaps) gifting you the amount of interest he has collected from you on an annual basis. So long as the sum is under $10K annually, there is no tax consequence to you and Dad gets to deduct it."

I disagree, in part. Dad does not avoid the interest income by making a gift; gifts to family are not deductible on FIT.

Regards, JAFO
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