Bell: Yes, with a parent-child loan, the imputed represents taxable income to the parent. That means the parent has to file a gift tax return if the imputed interest exceeds the annual gift tax exclusion, which is $15,000 per donor. The amount is excluded from your lifetime gift tax exemption, which now is $11.4 million. While the interest will still be subject to income tax, you can at least avoid the gift tax filing and any unintended use of your estate and gift tax exemption. Bell: Then the IRS might claim that the full amount of the loan you made was a gift at the time the loan was made.

Source: Forbes December 14, 2019 14:37 UTC