loan or gift?

What is the name of your state? md

here is the problem:

I asked someone i know for a large loan - and he agreed. then, before the money was transfered, i changed my mind and asked for it as a gift - which he agreed to instead of a load. then i actually decided that i didn't want it as a gift but as a loan like we originally agreed in the first place. i think it all happed before the money was transferred....pretty sure, but don't know if i can say 100%, but pretty sure....

now here is the prob:
it was a large enough amount of $ such that i would have to be taxed on if it were a gift?

so what is it's status? a loan or gift. the giver would *probably* agree either way ex post facto... i don't think it would be a prob for him. but i need to know if it is a loan or gift...

thanks!!!!!!

The receiver of a gift doesn't pay federal taxes on said gift...

q123 said:

What is the name of your state? md

now here is the prob:
it was a large enough amount of $ such that i would have to be taxed on if it were a gift?

so what is it's status? a loan or gift. the giver would *probably* agree either way ex post facto... i don't think it would be a prob for him. but i need to know if it is a loan or gift...

thanks!!!!!!

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It's whatever you two agree it is. If you can ever make up your mind. Loans do generally have some "minor" details, like, say an interest rate, repayment terms, etc.

The person receiving a gift has no tax obligations. The person making a gift may have to file a gift tax return - if the gift is more than $12,000 in any one year to any one person. However, no gift tax is actually due until reportable lifetime gifts exceed $1M.

anteater said:

It's whatever you two agree it is. .

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thanx, but i'm still a bit lost....we can change our mind after the $ was transfered??

order of events (if memeory sereves):

1. agreed to loan

2. changed mind, and greed to gift.

3. changed mind again, and agreed to loan

4. money transfered (in think, but not 100% sure).

I should add that these changes may have been a day apart, not in the same conversation. so they were agreed to, then changed a diff day.

it was more than 12k, so someone would have to pay taxes.... that's why i want to know the status...loan or gift... still a bit lost here....

In other words, if we origally agreed to a loan, can it be changed the next day? or the other way around (gift to loan)?

thanx for your help!

q123 said:

it was more than 12k, so someone would have to pay taxes.... that's why i want to know the status...loan or gift... still a bit lost here....

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This is not necessarily true. A gift tax RETURN would have to be filed, but whether taxes have to be paid depends on the total gifts given in the lifetime of the giver. In any case, the recipient would not be responsible...

Zigner said:

This is not necessarily true. A gift tax RETURN would have to be filed, but whether taxes have to be paid depends on the total gifts given in the lifetime of the giver. In any case, the recipient would not be responsible...

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thanx, but i still want to know if, once agreed as i gift/loan, it could be changed. and zinger, that may apply here....

thanx, but i'm still a bit lost....we can change our mind after the $ was transfered??

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Well, yes and no. Legally, it is what it is. Practically, who's going to know?

If it is a gift of over $12,000 a gift tax return will need to be filed within a year. Once the return is filed, you cannot change your mind either legally or practically. If it is a loan, the loan may have an imputed income to the maker of the loan. But, a loan (or, note) can be changed to a gift at any time by a present gift of the note.

Well, I'm beginning to think there is much more to the question than what you are asking...you seem to be framing the question so that you can get the answer you *want* to hear.

I'll just say that, in a situation as you describe, it's easier to turn a "loan" in to a gift, then it is to turn a "gift" in to a loan.

tranquility said:

Well, yes and no. Legally, it is what it is. Practically, who's going to know?

If it is a gift of over $12,000 a gift tax return will need to be filed within a year. Once the return is filed, you cannot change your mind either legally or practically. If it is a loan, the loan may have an imputed income to the maker of the loan. But, a loan (or, note) can be changed to a gift at any time by a present gift of the note.

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the q is, based on what i wrote above, was it a gift or loan in the first place? that is where i am still lost, see above post... i'm pretty sure ,99%, that all of this happend before any $ was transfered.

Zigner said:

Well, I'm beginning to think there is much more to the question than what you are asking...you seem to be framing the question so that you can get the answer you *want* to hear.

I'll just say that, in a situation as you describe, it's easier to turn a "loan" in to a gift, then it is to turn a "gift" in to a loan.

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zinger, i just want to hear the truth....i want to know either way, even if it means taxes must be payed, than so be it.... the facts are as i presented to the best of my memory. I'd love to have a definitive answer... that's all

q123 said:

zinger, i just want to hear the truth....i want to know either way, even if it means taxes must be payed, than so be it.... the facts are as i presented to the best of my memory. I'd love to have a definitive answer... that's all

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Consult a tax professional...

Zigner said:

Consult a tax professional...

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yeah, it's just that i think i need a lawyer. bec taxes depend on if it was aloan or gift. so i don't know if the tax guy can help with that.....

At the moment of transfer, what was the intent of the parties? If it was intended to be a gift and the person accepted it, it is a gift. If it was intended to be a loan and the person accepted the understood terms, it was a loan. If the intent of the parties was not the same, it is a bailment and needs to be returned on the request of the person who handed over the money and, if not, there could be criminal and civil penalties.

tranquility said:

At the moment of transfer, what was the intent of the parties? If it was intended to be a gift and the person accepted it, it is a gift. If it was intended to be a loan and the person accepted the understood terms, it was a loan. If the intent of the parties was not the same, it is a bailment and needs to be returned on the request of the person who handed over the money and, if not, there could be criminal and civil penalties.

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all i can say is that, to the best of my memory, it was agreed to be a loan before the transfer....we both agreed to the loan...

the other party, at a later date....must have been confused and asked me if it was a loan or gift, and i said a loan, cuz that's what we agreed on.....

it was mutual...no problems with that part of the deal...

so what now?

q123 said:

so what now?

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CONSULT A TAX PROFESSIONAL