Benjamin Yazersky CPA <johndoe[at]nowhere.com> wrote:
- quote -

That's if I make a loan without requiring interest, the IRS
will impute it.

What if I make a loan whose terms require interest at an
acceptable rate, but the other party just doesn't pay?

Or would (say) $2,000 of the $20,000 payment be considered
interest, the rest principal, and he has a bad debt loss of
$2,000 of principal?

Seth

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"Seth" <sethb[at]panix.com> wrote:
- quote -

You should research the imputed interest rules they do apply
to cash basis taxpayers

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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Bill Brown <brow...[at]longwood.edu> wrote:
- quote -

Actually, a "fun" trip or vacation does not qualify for the
two-month extension to file (used to, but no longer). The
reason you are out of the country must be for residence,
business, or other non-vacation

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Benjamin Yazersky CPA <johndoe[at]nowhere.com> wrote:

- quote -

But if he's a cash basis taxpayer and didn't foregive the
interest, isn't it just a bad debt he owns (which isn't
deductible because there's no basis in it)? When/if the
interest gets paid, it's then taxable.

Seth

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"Nan, EA in LA" <nanekl...[at]aol.com> wrote:
- quote -

Close, but no cigar. Unless you claim the interest as
taxable income you have no non-business bad debt to claim,
judgement or not. Analagous to the situation where you don't
get paid wages you thought you were owed. You have to show
an actual "loss" of an asset, such as your principal.

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- quote -

The return of principle is not considered taxable income.
The interest payments, if they had been made, would have
been taxable.

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parigi1...[at]yahoo.com wrote:

- quote -

If the loan was non-deductible in the first place, the
repayment is not taxable or reportable. I don't think there
is any way the loss of interest can be deducted unless you
want to sue, get a court judgement and claim a non-business
bad debt.

Nan, EA in LA

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parigi1...[at]yahoo.com wrote:

- quote -

Yes, it is.

- quote -

It is still always nice to hear again. The real thanks go to
Dick Adams and the more devoted regulars who incur real
opportunity costs by answering questions.

- quote -

There is nothing to report. Keep that "little document" as
well as a copy of the receipt you sent to your cousin in
case the IRS audits you someday.

- quote -

I do hope it's a fun trip out of the country and not one
where you're being shot at.

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<parigi1753[at]yahoo.com> wrote:

- quote -

The repayment of the prinicpal of the note presents no tax
issue. It is repayment of principal. Just keep the note in
your files & make sure to note the payoff date.

However, the forgone interest is another matter. There are
the imputed interest rules for you to address. If interest
was not paid, you have to impute it & include it in your
income. Then, you gift away the interest amount. So long as
its under the annual gift tax exclusion, there is no gift
tax issue. You just get stuck absorbing the interest income
with no cash received for it.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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<parigi1753[at]yahoo.com> wrote:

- quote -

You don't, and the amount of forgiven interest isn't enough
to trigger gift tax concerns by itself.

--
Phil Marti
Clarksburg, MD

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parigi1753[at]yahoo.com wrote:

- quote -

Well, we happen to have one of the best moderators on the
net. But please don't tell him that! We don't want him to
get a bigger head than he has already.

- quote -

I'll leave the definitive answer to those who actually do
returns. But it seems to me that if you are a cash basis
taxpayer you recognize only the interest you received in the
year it was received. Repayments of principal are not
taxable.

The glitch, I would guess, is whether a payment of principal
but not interest due might be considered in whole or in part
deemed interest.

Stu

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parigi1753[at]yahoo.com posted:

- quote -

Assuming you're like the vast majority of 1040 filers, and
you report income on a cash basis -- meaning you haven't
accrued any interest which you reported over the years -- it
would seem to be an _open and shut_ case for "Return of
Principal."

If -- and it would seem to be a big "If" -- the interest is
ever paid, then you could report that on Schedule B.

So IMO, you should report the "income" on Schedule D, as
repayment of a loan with the 2001 date of investment shown
and the appropriate 2006 date of repayment, "Proceeds" and
"Cost Basis" would _both_ be reported as $40,000.

Bill

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This newsgroup is one of the greatest resources on the net -
but then I'm sure you're all well aware of that! My problem
- trival to you experts, but intractable to me - is how to
declare a loan repayment I received in 2006. In 2001, I
loaned my cousin 40K for a house down payment. I drew up a
little document that he was to pay 5% simple interest PA,
and that the total was to be repaid no later than 2006. He
duly repaid the principle in 2006, but flaked out on the
interest. Not a relationship breaker, but how do I declare,
if at all, this 40K repayment on my 2006 1040?

Many, many thanks for any input you might have.
PS: I'm out of the country, so I apparently have until June
17 to file.

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