TaoWanderer
Member
What is the name of your state? Nevada
A friend of mine gave me $155,000 and told me that in order to avoid reporting it we could set it up like a loan: were she lends me the money at 5% interest rate of which I pay once a year interest only payment and then at the end of 30 years the remaining principle is due. We then use her once a year $11,000 allowable gift to be forgiven from the loan each year. At first we thought that I should pay her the interest payment with by sending her a check and then deduct the $11,000 gift from the principle, but we just came up with a second way, the $11,000 gift is first forgiven from the interest payment and the remainder is deducted from the principle so that I never have to send her any money and by the time 30 years are up all the interest payments and principle should be paid by the yearly $11,000 gifts. (The way I look at it is, she could just as well give me $11,000 cash each year and then I could pay her back the interest payment and then the remainder towards principle, so it would be practically the same as just forgiven the amounts, just easier) I don't see any laws being broken in either one of these methods but would the IRS have a problem with them? Are they legal?
Is it a good idea to form a document stating that she will forgive as a gift $11,000 of this loan per year or would that look too structured in case of the dreaded IRS audit?
This gift occured in October 2004 and now I reliese she could have just filed a gift tax return last apirl and she still wouldn't have had to pay tax on it until reaching the $1,000,000 lifetime mark. Is it too late if she just files a gift tax return on it this coming apiril?
Thank You sincerely from the bottom of my heart to those who so generous donate their time to help others. Merry Christmas.
A friend of mine gave me $155,000 and told me that in order to avoid reporting it we could set it up like a loan: were she lends me the money at 5% interest rate of which I pay once a year interest only payment and then at the end of 30 years the remaining principle is due. We then use her once a year $11,000 allowable gift to be forgiven from the loan each year. At first we thought that I should pay her the interest payment with by sending her a check and then deduct the $11,000 gift from the principle, but we just came up with a second way, the $11,000 gift is first forgiven from the interest payment and the remainder is deducted from the principle so that I never have to send her any money and by the time 30 years are up all the interest payments and principle should be paid by the yearly $11,000 gifts. (The way I look at it is, she could just as well give me $11,000 cash each year and then I could pay her back the interest payment and then the remainder towards principle, so it would be practically the same as just forgiven the amounts, just easier) I don't see any laws being broken in either one of these methods but would the IRS have a problem with them? Are they legal?
Is it a good idea to form a document stating that she will forgive as a gift $11,000 of this loan per year or would that look too structured in case of the dreaded IRS audit?
This gift occured in October 2004 and now I reliese she could have just filed a gift tax return last apirl and she still wouldn't have had to pay tax on it until reaching the $1,000,000 lifetime mark. Is it too late if she just files a gift tax return on it this coming apiril?
Thank You sincerely from the bottom of my heart to those who so generous donate their time to help others. Merry Christmas.