Interest income verification

[susieq]

I am very frustrated. A client loaned $50,000. The Promissory Note dated 9/24/04 stated that the Principal (50M) and interest of 6M - 12% ) would be payable at the end of a two month period - 12/1/04. Lots of interest but that was the agreement.

TP has a "check transmittal report" dated 4/28/06 for $6,000. She claims that was all of the interest she received from the borrower. The borrower paid back the $50 M in 10/06 after tp threatened to take him to court for non-payment.

At the payoff, the borrower had the lender (my client) sign an unconditional release that stated that $20M in interest has been paid to date and that the principal balance of 50M is the total balance due and owing. She said she didn't read that about the 20M.

If she truly received 20M in interest then she should report it. I am attempting to get docs from the borrower proving payment and he is being elusive. I indicated to him that the amounts reported on both sides should match and that we can send a 1099 for 6M.

His latest message to me was that he was all set on the accounting end of it and that I needed to get the docs from my client. I asked him for copies of the cancelled check (front and back) I think he is a "crook" What would you do?

[Bucky]

Why would you send him a 1099? Wasn't it your client with the interest income. Was this mortgage interest of some type?

[susieq]

1099 response

I don't understand your 2nd sentence.

[LTS]

sq - you had me at frustrated

1) a small point: to me 50m means 50 million & 50k means 50000.
2) bucky's 2 sentence means the payer (crook) of interest files the 1099int form to the recipient (client). unless it is mort interest, which i doubt. then the situation is reversed, and the recipient (client) files a 1098 mort int form to the payer (crook).

i would wait till sometime after 1/31/07 to see if the other guy sends your client a 1099int form. based on your description of the situation, i doubt other the guy is interested in complying with tax details, but you never know. i think he is interested in hanging his hat on any kind of claim of a deduction from his end of things based on the release your client signed.
if you trust your client, i would still have her sign off on all claims of fact in this situation. claim 6k int interest income (around a 6% return for 2 years), and forget about the crook. uness he sends the 1099int to your client. then you have a legal problem with facts to be determined in a court. not likely the other guy wants to get near a court.