MostlySerious
Junior Member
What is the name of your state? California
1) Made a $200k loan to renovate brother and sister-in-law’s large Colorado house in late 2004 for later sale in 2005. Loan secured by second deed of trust. Interest only loan payments were made during the renovation. Loan monies source from 401k via a Self-directed 401k investment custodian.
2) In 2005 house up for sale, but with real estate crash, brother and sister-in-law lost their jobs, house foreclosed and sold for less than first mortgage. I received no monies from the property sale given it was a second mortgage.
3) Brother and sister-in-law felt bad what happened and have been making small payments ever since.
4) Brother and sister-in-law divorced in 2010, but continued making separate small payments.
5) Sister-in-law just passed away and payments have stopped. She had few assets.
Questions
1) Can I claim a bad debt on my taxes this year for my sister-in-law’s remaining loan balance?
2) Based on the size of payments brother is making, he will need to live until 150 years old to pay off his share of the loan. Can I claim a bad debt on my taxes for my brother’s remaining loan balance this year if he stops making payments?
3) If I close out the loan for brother and sister-in-law through the investment custodian, will I be subject to an IRS gift tax on the $150k loan balance?
Thanks for your thoughts.
1) Made a $200k loan to renovate brother and sister-in-law’s large Colorado house in late 2004 for later sale in 2005. Loan secured by second deed of trust. Interest only loan payments were made during the renovation. Loan monies source from 401k via a Self-directed 401k investment custodian.
2) In 2005 house up for sale, but with real estate crash, brother and sister-in-law lost their jobs, house foreclosed and sold for less than first mortgage. I received no monies from the property sale given it was a second mortgage.
3) Brother and sister-in-law felt bad what happened and have been making small payments ever since.
4) Brother and sister-in-law divorced in 2010, but continued making separate small payments.
5) Sister-in-law just passed away and payments have stopped. She had few assets.
Questions
1) Can I claim a bad debt on my taxes this year for my sister-in-law’s remaining loan balance?
2) Based on the size of payments brother is making, he will need to live until 150 years old to pay off his share of the loan. Can I claim a bad debt on my taxes for my brother’s remaining loan balance this year if he stops making payments?
3) If I close out the loan for brother and sister-in-law through the investment custodian, will I be subject to an IRS gift tax on the $150k loan balance?
Thanks for your thoughts.