Loan from mother to Son's business

[Florida_EA]

A loan was given by mother to son's partnership in which she had no interest. She passed away. How does the son treat the loan in the partnership return. As income?

[spanel]

A loan was given by mother to son's partnership in which she had no interest. She passed away. How does the son treat the loan in the partnership return. As income?

The obligation to pay the loan did not go away upon her death, correct? The partnership now owes the estate the money instead.

Chris

[Burke]

Was it a true loan with documentation signed by both parties? What did the loan agreement say? Was it to be forgiven on her death? How was it booked into the partnership? Were repayments made on any systematic basis? Without all this, it appears it was a gift, unless her will mentioned how it was to be treated, perhaps as a reduction in his share of the estate?

[taxea]

Aside from all of the above this is capital to the business.

[ATSMAN]

When dealing with mother/son business issues be VERY CAREFUL and INSIST on FULL DOCUMENTATION.

At a much earlier time I got badly burnt on a LLC return. Got sued, had to pay a judgement because these people were old clients of mine and I took their word without inspecting the actual documentation. People will throw you under the bus when they get into trouble with IRS. I learned my lesson dealing with business situations that involve family members.