Hello
My mother has recently loaned some of my siblings a large sum of money and is concerned that the IRS will consider these loans as gifts and would therefore have to pay a large gift tax. She has recently contacted an attorney regarding this and the attorney has drawn up many legal documents addressing the issue. In the course of all of this the attorney has stated that in-order for these to qualify as loans with the IRS there must be some interest attached to the loans and that just paying back the principle will not safe guard my mother against persecution from the IRS. Furthermore, some of these loans were made a few years ago and the attorney insists that even if the loans are paid back in full right now interest would have to be tacked on from the day of the loan.
Is this true? Can a family member give another a loan with no interest and not have it considered a gift by the IRS? All the loans are secured with real property,(houses and land). In some instances these loans are the only notes on the property. My mother does not want the interest and knows that 50% of any interest collected will go to the IRS anyway. In fact she is not really concerned about being paid back at all she just wants it documented that these are loans.
Best Regards
My mother has recently loaned some of my siblings a large sum of money and is concerned that the IRS will consider these loans as gifts and would therefore have to pay a large gift tax. She has recently contacted an attorney regarding this and the attorney has drawn up many legal documents addressing the issue. In the course of all of this the attorney has stated that in-order for these to qualify as loans with the IRS there must be some interest attached to the loans and that just paying back the principle will not safe guard my mother against persecution from the IRS. Furthermore, some of these loans were made a few years ago and the attorney insists that even if the loans are paid back in full right now interest would have to be tacked on from the day of the loan.
Is this true? Can a family member give another a loan with no interest and not have it considered a gift by the IRS? All the loans are secured with real property,(houses and land). In some instances these loans are the only notes on the property. My mother does not want the interest and knows that 50% of any interest collected will go to the IRS anyway. In fact she is not really concerned about being paid back at all she just wants it documented that these are loans.
Best Regards
