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Started By
Message
re: gift tax question
Posted on 8/1/13 at 2:04 pm to LSUMon
Posted on 8/1/13 at 2:04 pm to LSUMon
quote:
Out of curiosity, how is this a red flag and how/who is commonly snuffing this out? Not arguing just wondering.
First, you have to actually charge interest, and the debtor must pay on it, or else it is a 20k gift.
Second, you would have to report it as a debt when you applied for a mortgage or borrow money, which is dumb because it would throw your income/debt ratio out of whack, for no good reason.
And the IRS can commonly sniff this out if you were ever audited.
3
Posted on 8/1/13 at 2:08 pm to Bear Is Dead
quote:
you have to actually charge interest
Is Toyota financial paying tax on the 0% loan they just gave me?
Posted on 8/1/13 at 2:19 pm to Bear Is Dead
quote:
Second, you would have to report it as a debt when you applied for a mortgage or borrow money, which is dumb because it would throw your income/debt ratio out of whack, for no good reason.
You are by the books. If no one, ie. your parents, aren't showing this loan on a personal financial statement or any other government submitted documents with their sons social security number on it, there is NO record of this.
quote:
And the IRS can commonly sniff this out if you were ever audited.
First the chances of getting audited for your personal income tax return is slim unless you give them a reason to look.
Second 80% of audits are now computer/letter audits. Meaning all they do is match social security/EIN numbers with what you have on your return and what was submitted by other parties in that same number. If no one submitts the loan there is no record of it.
And that 80% is going to climb higher with all the current problems the IRS is having and a reduction in manpower.
Is there a risk doing it this way, yes. But I belive it is minute.
Posted on 8/1/13 at 2:58 pm to Bear Is Dead
quote:I don't think you understand the law with respect to below market interest rate loans. The gift is usually limited to the amount of interest that is less than the applicable federal rate. So the gift will be at most a small fraction of the $20K loan.
First, you have to actually charge interest, and the debtor must pay on it, or else it is a 20k gift. Second, you would have to report it as a debt when you applied for a mortgage or borrow money, which is dumb because it would throw your income/debt ratio out of whack, for no good reason. And the IRS can commonly sniff this out if you were ever audited.
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