tax effects / borrowing from private source

Hi there,
Got a question about borrowing money from a private source. A family member has offered to lend us $65,000 at 8% for one year, and I’m thinking of buying an investment lot in Lee County, Florida. If I turn the property within one year for a reasonable profit and pay this person back, they only have to pay taxes on their 8% gain, right? They don’t have to “explain” when they want to withdraw their own money for short periods? This person asked me this, and I suggested they contact a tax professional of course. But I was curious myself how that would work. This person has considerable cash built up and I’m hoping success in this transaction could lead to more.

Thanks very much, I enjoy reading this forum

My answer to this question is Yes and No! Do to this being a family deal why don’t you gift them up to 11k in lieu of the 8% that way it is tax free for them and a write off for you!

But of course contact a tax advisor!

great idea, thanks so much!!

Just was wondering if “gifting” allows a tax write-off for the gifter. If so, I’ve been missing the boat with my kids for years!

Let me check the laws and give you acurate info when it comes to taxes I like it to come strait from the I.R.S. nothing personal I know the answer I just want to word like they would to aviod confusion

Gift Giving

Tax Tip 2005-39, Feb. 24, 2005

If you gave any one person gifts valued at more than $11,000, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift.

The person who received your gift does not have to report the gift to the IRS or pay either gift or income tax on its value.

You make a gift when you give property, including money, or the use of or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:

Tuition or medical expenses that you pay directly to an educational or medical institution for someone’s benefit
Gifts to your spouse
Gifts to a political organization for its use
Gifts to charities
If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.

For more information, get IRS Publication 950, Introduction to Estate and Gift Taxes, IRS Form 709 or 709-A, United States Gift Tax Return, and the instructions for Form 709. They are available for downloading or by calling toll free 1-800-TAX-FORM (1-800-829-3676).

So that being said you can gift anyone other then your spouce up to 11k And write it off as a gift! You and your wife can both gift any one person 11k each for a total of 22k I know I use this a ton I also belive it to be true that there is a max of 1 million per life time But just like everything else here is my legal disclaimer CONTACT THE I.R.S., YOUR ATTORNEY AND OR YOUR TAX ADVISOR!!!

Thanks for the info. I cashed in on a retirement account to pay for legal fees for my daughter. Had to pay tax penalties on it but now I can recoup some of it my writing it off my taxes. I guess it is true that with the government the left hand doesn’t know what the right is doing. Thanks again. :wink:

No prob at all if you want to read on this you can go to

Let’s check the tax code again on the DEDUCTIBILITY of gifts to an individual.

I am taking the opposite position that the gift is not a deduction on your 1040. Gifts that exceed the $11K annual tax free gift exclusion are reported on a separate Gift Tax Return. Once lifetime taxable gifts exceed $1 million, the donor has to pay a gift tax.

I agree that a gift is not taxed as income to the recipient.

That is always what I have been led to believe all these years. If one was able to deduct gifts to kids there would be college tuition deducted, etc. That would be a big tax loss it would seem for the gov. I should probably consult a tax guy. Save me bucks one way or the other. Thanks for your input.