Message Font: Serif | Sans-Serif
No. of Recommendations: 0
2gifts: "DH and I made a loan to his dad a couple of years ago which is all documented in a promissory note with a reasonable rate of interest. There was no set payback schedule, and we are happy to wait to collect on this debt after FIL passes on which we hope will be many years out, but interest does continue to accrue.

To help FIL again, it is now necessary for him to start paying us back on this loan. I realize that the interest will be reportable on our taxes as interest received, but I don't know how to apportion what is interest and what is principal being repaid. I don't have an amortization table because we didn't care about regular payments. Can I just do some sort of ratio with some amount being reportable interest and the rest being return of principal?

Is there a formula to do this? Does it matter as long as I have a logical and reasonable approach to this?"

I do not know the tax answer to your question (and I am certain that the resident pros will respond), but most notes with which I am familiar usually require payments to be applied to interest first and then to principal.

Does your note address the issue?

Regards, JAFO
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.