Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I just gave my nephew money for a downpayment on his first home. Although we have the understanding that the money is a loan, I had to sign a document that the money was a gift. He made settlement on Dec 27, 1999. What are the consequences of my good deed? Will he have to pay taxes on the 'gift?' Can anything be done to fix the predicament?
Print the post Back To Top
No. of Recommendations: 0
I just gave my nephew money for a downpayment on his first home. Although we have the understanding that the money is a loan, I had to sign a document that the money was a gift. He made settlement on Dec 27, 1999. What are the consequences of my good deed? Will he have to pay taxes on the 'gift?' Can anything be done to fix the predicament?

He won't have to pay any taxes on the gift, but you might if it was more than $10k. If you and your nephew are married, the maximum tax-free gift could go as high as $40k. A search on "gift tax" will turn up more details.

Unsolicited advice - consider it a gift and be happy if you see any of the money again. It will make family relations much better that way.

--ptheland
Print the post Back To Top
No. of Recommendations: 0
What's the predicament?

He had to tell the bank that the money was not a loan, in order to qualify for their financing, I would imagine.

Does your 'understanding' with him involve a repayment schedule and interest?
Print the post Back To Top
No. of Recommendations: 0
rose0529: <<<<I just gave my nephew money for a downpayment on his first home. Although we have the understanding that the money is a loan, I had to sign a document that the money was a gift. He made settlement on Dec 27, 1999. What are the consequences of my good deed? Will he have to pay taxes on the 'gift?' Can anything be done to fix the predicament?>>>>

elibortPrairiela: "What's the predicament?

He had to tell the bank that the money was not a loan, in order to qualify for their financing, I would imagine.

Does your 'understanding' with him involve a repayment schedule and interest?"


Here now, I thought the predicament was realizing that perpetrating a fraud on federal insured lender is not a good idea and might carry consequences. If not that, then realizing that the nephew could never "repay" the "loan" and still claim with a straight face that there wqas no loan to repay because dear aunt Rose would never commit such a fraud.

Guess I am getting too cynical in my dotage.

Just my $0.02. Regards, JAFO

Print the post Back To Top
No. of Recommendations: 0
I think it would have been better if you had said that it was a demand note not a gift. See# 24446
Print the post Back To Top
No. of Recommendations: 0
couzensj: "I think it would have been better if you had said that it was a demand note not a gift. See# 24446"

But then it would not have helped the nephew qualify for the house, or at leeast not as conveniently. A demand note would be short term debt and affect all the debt ratios as well as calculations of how much equity the nephew had in the house.

Just my $0.02. Regards, JAFO

Print the post Back To Top
No. of Recommendations: 1
<<I just gave my nephew money for a downpayment on his first home. Although we have the understanding that the money is a loan, I had to sign a document that the money was a gift. He made settlement on Dec 27, 1999. What are the consequences of my good deed? Will he have to pay taxes on the 'gift?' Can anything be done to fix the predicament?>>

JAFO's right on the money with his take on the entire issue (at least IMHO).

Basically, what happend was that you both (you and your nephew) both conspired to lie to the lender. That's not something that you really want to do (again, IMHO).

As pointed out in prior posts, if the amount of money that you "gifted" him was $10k or less, there are no consequences to either of you. If the amount was OVER $10k, then YOU have a gift tax return to file (Form 709) for 1999, and you'll have used up part of your overall unified credit.

If you decide that since you have already lied to the lender, and want to move forward with the issue, what you really want to do is to create a note with your nephew for the repayment of the principal and interest of the loan, and then use this note to slap a lien or mortgage on the property. If your nephew wants to claim the interest that he pays to you as deductible home mortgage interest, the property will have to be encumbered. Of course, if he pays any deductible interest, you'll also be obligated to report the interest as income on your individual income tax return. You can read more about mortgage interest in the Taxes FAQ area.

So you've got a little bit of a mess on your hands here. I don't know what you are really going to do about it.

Oh...what a tangled web we weave...when first we practice to deceive. (sorry...don't mean to preach...but I've always loved that saying and it seemed appropriate).

TMF Taxes
Roy

Print the post Back To Top
No. of Recommendations: 0
<<<<. . . what you really want to do is to create a note with your nephew for the repayment of the principal and interest of the loan, and then use this note to slap a lien or mortgage on the property.>>>>

Except that a subordinate lien is probably prohibited by the existing first lien; if prohibited, then putting it in place could trigger a default and acceleration of the first lien. It only gets messier.

Another poster probably had the best suggestion. Consider it a gift and do not plan on getting it back.

Just my $0.02. Regards, JAFO

Print the post Back To Top
Advertisement