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johnsmith209

Junior Member
What is the name of your state?What is the name of your state? OREGON

Hi,
Is there any legal problem if I wanted to loan a friend $8,100.00 to be paid back after 5 years. No interest. I just want the principal back at the end of 5 years. Please let me know if the IRS or anyone else may have a problem with this.

Thank you,
John
 


I AM ALWAYS LIABLE

Senior Member
johnsmith209 said:
What is the name of your state?What is the name of your state? OREGON

Hi,
Is there any legal problem if I wanted to loan a friend $8,100.00 to be paid back after 5 years. No interest. I just want the principal back at the end of 5 years. Please let me know if the IRS or anyone else may have a problem with this.

Thank you,
John

My response:

What collateral are you taking to guarantee the loan payments?

What if he doesn't repay you? How are you going to get your money?

Is there a signed and dated Promissory Note involved?

IAAL
 

johnsmith209

Junior Member
Hi,

Yes, there will be a signed and dated Promissory Note involved.
No collateral to guarantee the loan payments - Don't worry about that... I'm not. I don't care if it dosn't even get paid. I just want to know if there is any law against and interest free loan. I was told that it is against the law. Is that so? If so, what crazy law is that?

Thanks,
John
 

I AM ALWAYS LIABLE

Senior Member
johnsmith209 said:
Hi,

Yes, there will be a signed and dated Promissory Note involved.
No collateral to guarantee the loan payments - Don't worry about that... I'm not. I don't care if it dosn't even get paid. I just want to know if there is any law against and interest free loan. I was told that it is against the law. Is that so? If so, what crazy law is that?

Thanks,
John


My response:

Whomever told you that making an interest-free loan to someone is illegal, is an idiot. The IRS only cares about "Income", and not loans between friends. Also, if you're not concerned that your $8,100.00 will only be worth about $7,500.00 at the end of 5 years, then that's your business.

IAAL
 

You Are Guilty

Senior Member
Just to clarify a bit - IAAL is correct in his responses, but it's more because your loan is less than the $10k/year gift exemption that IRS recognizes. Had it been more, you would have incurred tax consequenses for making a loan for less than the market rate. (Essentially, they will impute the market interest rate onto the loan and make you liable for paying tax on that amount).

However, as noted, you're in the clear and it's not illegal by any means.
 

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