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I really appreciate everyone's time in responding. The crux of the matter is that the lender of the $20,000 loan(for the purpose of broker margin calls), subsequent to the loan, does not mind if the debt is not paid back as long as there is an appropriate way to do this. One idea was, as the first annual payment came due, the lender would gift the borrower $10,000 (yearly federal allowance) toward the principle and interest and repeat this in following years until the debt was "paid back." The question, going back to the original posting, was how must the lender/donor and the borrower/recipient deal with the annual $10,000 gift on their 1040's according to the tax code as the debt is paid down?

addendum:The original loan interest rate was determined by the federal tables when there is an intra-family loan.
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