Anthony S asked:
My mom is giving my sister $19,000 to pay off her credit debt. She will repay her for the next few years on a monthly basis. Can she be liable for some sort of income or gift tax for this?
My mom is giving my sister $19,000 to pay off her credit debt. She will repay her for the next few years on a monthly basis. Can she be liable for some sort of income or gift tax for this?
#1 by Auntie Mame - January 6th, 2010 at 22:23
It is not a gift nor is it income, it is just a loan. No taxes due. However, sister and mom should each sign a paper indicating that this is a loan to be repaid in monthly payments of $317 each over the next 5 years, just in case the IRS should ask either one about it. Without an agreement to be repaid, it is a gift and subject to gift tax.
#2 by David M - January 7th, 2010 at 13:09
If she defaults on the loan whatever she doesn’t pay back can be considered income and a loss to your mother which she could writ off on her taxes.
#3 by hanging head in debt - January 7th, 2010 at 13:50
If they do sign a contract, make sure they get it notorized and filed with your county clerks office in case the IRS does come asking about it!!!!
#4 by bud68 - January 8th, 2010 at 04:20
No. But your mom could be liable for gift tax.
#5 by AuditChick84 - January 9th, 2010 at 18:43
Debt is not income.
#6 by Lisa A - January 11th, 2010 at 13:57
Your mom will owe taxes on the interest income that your sister pays her. Your sister is getting a loan, not a gift, and not income, so no taxes are due on her end.