free tax advice?

Question

I am in debt to my father for a large sum of money that he has loaned me over the years.I know he never expected it back,but he has fallen on very hard times and is in "dire straights" to put it mildly.Can I take a loan on my house and pay him back around 45k, without he or I having to pay any "income" or other taxes.I did the math and I know I owe him more than that.I would like to repay my debt to the man without having to pay tax on money I already paid taxes on.Please...Please....Please advise me!!!!

Thank you

Answer 1

You can borrow and pay him back without any tax consequence to you. However, dad may have to report some interest income on the loan repayment. If you did not have a formal loan agreement with a stated amount of interest and dad does not report any interest income then, if he should get audited, the IRS can calculate and add interest income to his return. This would result in additional taxes due, interest on the taxes and penalties.

If dad chooses to leave it off his return that is his business, since I'm not doing his return, but you should be aware that may cause problems.

Answer 2

If you take a loan on your house, then use it to pay back your dad, neither of you would pay any taxes on that amount. You wouldn't because it's a loan, and a loan isn't income. He wouldn't because he's just getting paid back, and since the amount is below what you borrowed, he's not getting any interest.

Answer 3

You dad can make a gift loan to you of up to $100,000 with no interest being charged. He would pick up as his income the amount of interest income you have for the year. If you don't have interest income then there would not be any tax consequences to you or him.
If the loan you take out is a home equity loan then you can deduct that interest on your return. This assumes that you don't already have a home equity loan. The home equity loan can be for up to $100,000.
Also you might not want to give your dad the full amount at one time. If he has creditors and they find out he has money in a bank account they could attached the account to satisfy what he owes them. Give it to him as he needs it and they won't be able to get at it.

Answer 4

This question has two answers:
1. He won't pay taxes on the funds he has already pay taxes on.

2. However, depending on exactly how the "loan" is contracted determines how or why taxes could become legitimate in this partical circumstance.

Answer 5

In 2005 you could give a gift valued at up to $11,000 without YOU having to pay taxes on it. The value may be different for 2006 and/or 2007. See this IRS site http://www.irs.gov/newsroom/article/0,,id=107815,00.html for more info. You will not have any income tax on taking a loan on your house. You might have tax on your house if you SOLD it and made more than $250,000. The recipient of a gift generally doesn't have to pay taxes, it is the responsibility of the donor. Think about this - give him $11,000 in 2006, $11,000 in early 2007 (like 1/2/07) and loan him the rest at a low interest rate.

Answer 6

bypass to Jackson Hewitt. they're going to experience free to study yo each and each and every of the loose suggestion yo uare prepared to pay for. they don't comprehend what they're doing, although the cost is sweet. suggestion = loose good suggestion = good cost

Answer 7

there would be no taxes due for you or him...in fact you might get a tax deduction for the closing fees, interest and all the associated costs of refinancing.

Answer 8

Excellent advice from glibby. Might not be what you want to hear, but correct, nonetheless. Please consider his comments carefully.

Answer 9

You can, yes