borrowed money from family

[ginabeene]

Nevada
Hubby's biological mother and her husband let us 'borrow' some money from them. They are now wanting us to sign a promissary note so they can take it off their taxes. Is this necessary? I was under the impression if he wanted it off his taxes that he would 'gift' it to us, but it would be his responsibility. I am reluctant to sign something that says we owe them money.

Thank you for your help!
Gina Moore

 

[loku]

No valid tax deduction

I don’t think he can legally deduct the loan on his tax, no matter what it was, as long as it was a personal and not a business loan on his part. However, if you do owe the money, it is only fair that you give him a note. It is common to do so.

 

[ginabeene]

Just want to be sure I understand...

So, you're saying he can't 'take it off' his 'estate' to lessen his tax if he considers it a loan? I know he can take it off if he were to 'gift' it to us - it's well under the $10,000 limit for gifts.

Just want to clarify. Am I understanding you correctly?

I don't mind owing them money, because this is my husband's biological mother and her husband. They've paid for their daughters' school and cars and houses, but they've done nothing for my husband. Long story - his 'mother' was his sister until 10 months ago. She finally told him that she was really his mother, not his sister. But she's never done anything for him financially. They've told us that we can pay it back 'whenever,' and that there is no time limit, if we can even ever pay them back.

It's sort of a weird situation, and very hard for us considering how much they have and what they've done for their 2 daughters, and that they've done nothing for my husband. But I guess that's another thread....

Thanks for the info!
Gina

 

[loku]

My answer assumed that he wanted an income tax deduction. As for estate tax, you were correct in the first place. It would no longer be in his estate for estate tax purposes, if he gifted it to you, but if it is a loan, the value of the note would be an asset in his estate.

And you are also correct that fairness is another thread.