Family Bad Loan- $7,710,800.00

[Sabre]

Mother made numerous documented loans in various sums over a 12 year term. Son never paid back a nickle and Mom did not make any demands. We recently had an attorney file a deficiency judgement. Now family members want me to take this as a bad debt deduction. I have a problem with this: - no demands were made for payment, family member and a sizeable sum.

The son has filed for bankruptcy.

My main concern is that the IRS may consider this a wealth transfer scheme "Substance over Form" and mom could owe large gift taxes since most of the loan were made when the gifting limit was one million.

I realize if i took this loss it would be a short term capital loss. Mom usuallly has anywhere from $75,000 to $125,000 in capital gains each year.

Nickle for your thoughts.

[ChEAr$]

Mother made numerous documented loans in various sums over a 12 year term. Son never paid back a nickle and Mom did not make any demands. We recently had an attorney file a deficiency judgement. Now family members want me to take this as a bad debt deduction. I have a problem with this: - no demands were made for payment, family member and a sizeable sum.

The son has filed for bankruptcy.

My main concern is that the IRS may consider this a wealth transfer scheme "Substance over Form" and mom could owe large gift taxes since most of the loan were made when the gifting limit was one million.

I realize if i took this loss it would be a short term capital loss. Mom usuallly has anywhere from $75,000 to $125,000 in capital gains each year.

Nickle for your thoughts.

It's going to cost more than a nickel, what with an amount like more than seven million dollars. That is just astounding.

[S T]

I would Not Prepare the Return

If there is an Attorney - Let the Attorney File the Tax Return

If it is a sizeable Estate, have the Estate/Trust Attorney re-write so this "child" does not receive this portion of his Inheritance - only amounts exceeding what has already been given to him.

The Child is actually going to name his Mother in Bankrupty Filing?

Hmmm!

Sandy

[JohnH]

You might want to consider passing on this one. First of all, it doesn't pass the smell test. Secondly, there are lots of tentacles to this if it's true. With other family members involved, the lawsuits are likely to start flying left and right. You don't want to be in the line of fire.

Let them get a good tax lawyer involved, because it's going to be a mess on several levels no matter what is done on the return. Besides, how much time do you have available to spend sitting in court in the future? And you can be pretty sure you will be doing that if you get even a little bit involved.