Older taxpayer, cash wealthy, has made business loans to two corporations owned by two sons. Amt of loan is $150,000 apiece.
There was never an intent to issue an interest-bearing loan. However, interest must be imputed. We've decided to use 4%. This means each loan will register imputed interest of $6000.
Older taxpayer wishes to "gift" the interest to the two sons, well within the annual gift limit.
Sons are fine with the idea, all parties would rather not have this interest income or deduction from the start.
Can the "gift" of this interest avoid the recording of interest expense by these corporations and the reporting of interest INCOME by the parents?
There was never an intent to issue an interest-bearing loan. However, interest must be imputed. We've decided to use 4%. This means each loan will register imputed interest of $6000.
Older taxpayer wishes to "gift" the interest to the two sons, well within the annual gift limit.
Sons are fine with the idea, all parties would rather not have this interest income or deduction from the start.
Can the "gift" of this interest avoid the recording of interest expense by these corporations and the reporting of interest INCOME by the parents?