Tax Tabloid #8

Be wary of strong drink, it can make you shoot at tax collectors ...and miss. - Robert A. Heinlein

There have been many disagreements between the IRS and taxpayers involving loans to relatives and "bad debt" deductions. One must be very careful as loans to family members are usually presumed to be a gift versus a loan. It is the taxpayer's responsibility to prove that there was intent to collect the debt when the loan was made.

The IRS will look for the following:

Is there a written loan agreement?

Is interest being charged?

Is there a written schedule for re-payment?

Was any collateral required for the loan?

Were any payments made?

Was there a demand for payment?

Consult your tax advisor for detailed information.