loans/gifts of the past

[lostinpa1]

What is the name of your state? pennsylvania


In a couple previous years I had given loans to friends, and was under the belief I didn't have to do anything with this. Well from what I understand I would have been correct if I did not exceed the gift limit during the current year for an individual. What do I do for past years? I had gave a loan of ~ 15k in 2003, which was paid back in 2004. Then made another in 2006 of 30k, which is being paid back in payments, of which the total did not exceed the 12k limit for '07. So should I claim these as gifts and fill out a 709, or should I fill out some other form and fill it out as a loan. For the 03 I do not have copies of the loan agreement anymore, but I do for the 06 one. Also should I notify the ex-gf of whom paid back the loan in 04, to do something on their return. The 03 one was only for 5 months so wasn't much interest, it is just unlucky it was the end of 03 when the loan was made. so I am thinking I need to fill out a 1040x for 2006, with a 709 for that year, and depending on whether it is to be treated as a loan or a gift, then possibly include on my 2007. I have never touched any of my lifetime credit for gifts, so I can utilize that. Also do I need to do anything for state tax in pa? Also having just realized this, I had already made a loan for this year 2008, that would be a > 12k, if I make sure the person I lent to has paid back enough to get me below the 12k will I be fine with that?
Thanks

 

[TinkerBelleLuvr]

A gift is money that is NOT expected to be paid back. Since these are loans (money expected to be returned), then WHY do you think you need to report it on your taxes?

We do NOT report loans as income.

 

[LdiJ]

What is the name of your state? pennsylvania


In a couple previous years I had given loans to friends, and was under the belief I didn't have to do anything with this. Well from what I understand I would have been correct if I did not exceed the gift limit during the current year for an individual. What do I do for past years? I had gave a loan of ~ 15k in 2003, which was paid back in 2004. Then made another in 2006 of 30k, which is being paid back in payments, of which the total did not exceed the 12k limit for '07. So should I claim these as gifts and fill out a 709, or should I fill out some other form and fill it out as a loan. For the 03 I do not have copies of the loan agreement anymore, but I do for the 06 one. Also should I notify the ex-gf of whom paid back the loan in 04, to do something on their return. The 03 one was only for 5 months so wasn't much interest, it is just unlucky it was the end of 03 when the loan was made. so I am thinking I need to fill out a 1040x for 2006, with a 709 for that year, and depending on whether it is to be treated as a loan or a gift, then possibly include on my 2007. I have never touched any of my lifetime credit for gifts, so I can utilize that. Also do I need to do anything for state tax in pa? Also having just realized this, I had already made a loan for this year 2008, that would be a > 12k, if I make sure the person I lent to has paid back enough to get me below the 12k will I be fine with that?
Thanks

A loan is NOT a gift. Nothing that you have described here has anything to do with a gift. They are loans, pure and simple. You do not have to fill out form 709 or amend any tax returns.

 

[lostinpa1]

Ok this is why I did not report this in the first place because that was what I was told before, not to report loans. But, you do all these searches on the net about it now. Back in 2003 I really was totally unworried about it, lets face it it was a 5 month loan, I really did not make squat on that loan. Basically they were in a catch 22, they wanted to get a lower rate and wanted to move their cc's over to a heloc, but could not do it because they had the debt in the first place. So the money paid off the cc's and then once they didn't have the debt, they got the heloc and paid me. They were clear to the bank what they were getting the heloc. No lectures, that was really dumb move for them, and I would never help someone do that again. Ok, you are right I really should not be calling these gifts, because I do expect them to be paid back and I have an agreement to protect myself.
Ok if the government did not care about interest made on personal loans, then why do they have what is called imputed interest? The reason I mention it along with the gift tax is because every place I read says if it is under 10k you don't need to record it because it could be easily viewed as a gift to them with them paying you back that could count as a gift back to you. But as I said irrelevent though because this was well over the 10k. So that being said then what if anything do I need to do if anything to report it as interest. As I said the loan was actually made back in 2006.

 

[TinkerBelleLuvr]

You are required to report the interest that YOU made from the loans as taxable income. If they were interest-free loans of a short duration, then there wouldn't be any taxable income.

 

[lostinpa1]

So I would need to put it on schedule B of my 2007, and I do need to create a 1040x, with an updated schedule B. And do I have to do the same on my pa state tax?

 

[LdiJ]

So I would need to put it on schedule B of my 2007, and I do need to create a 1040x, with an updated schedule B. And do I have to do the same on my pa state tax?

Yes, filing a 1040X to amend your returns to include the interest income, would be the appropriate thing to do for any year in which you received interest on a loan that you personally made.

Yes, for 2007 you would include the interest on Schedule B.