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Posted by parigi1753 on April 22, 2007, 2:30 pm
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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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<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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Posted by Bill on April 23, 2007, 10:25 pm
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parigi1753@yahoo.com posted:
> 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.
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
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Stuart A. Bronstein on April 23, 2007, 10:25 pm
Please log in for more thread options parigi1753@yahoo.com wrote:
> This newsgroup is one of the greatest resources on the net -
> but then I'm sure you're all well aware of that!
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.
> 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?
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
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Phil Marti on April 23, 2007, 10:25 pm
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> 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?
You don't, and the amount of forgiven interest isn't enough
to trigger gift tax concerns by itself.
--
Phil Marti
Clarksburg, MD
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bill Brown on April 23, 2007, 10:25 pm
Please log in for more thread options parigi1...@yahoo.com wrote:
> This newsgroup is one of the greatest resources on the net -
Yes, it is.
> but then I'm sure you're all well aware of that!
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.
> 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?
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.
> 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.
I do hope it's a fun trip out of the country and not one
where you're being shot at.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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