Angela enrolls as a student at Local College during the current year. Before she starts school, her parents lend Angela $80,000 with the stipulation that she will lend the entire $80,000 back to them. The loan is evidenced by a non-interest-bearing note payable in 10 years. Several days later, Angela returns the $80,000 to her parents in exchange for their $80,000 note secured by a mortgage on their personal residence. The note has an 8% interest rate and requires monthly interest payments, with the principal due in 10 years. Angela's parents pay her $6,400 in interest on the loan during the current year. Mortgage interest on a principal residence is deductible as an itemized deduction.
Discuss whether Angela's parents should be allowed a deduction for the $6,400 in interest paid to Angela.