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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
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