Answer:
Rather than repeat the rather lengthy definition provided by the IRS, I suggest you'll find it on page 1098-1 (21st page of the PDF file) in the IRS's 2004 version of Instructions for Form 1098, etc.
Remember that you need only report interest on loans on which an individual is the payer. You need not report on form 1098 interest received from a corporation, partnership, trust, estate, association, or business (other than a sole proprietor) even if an individual is a coborrower and all the trustees, beneficiaries, partners, members or shareholders of the payer of record are individuals.
First published on BankersOnline.com 2/7/05