@RacknarockGod wrote:
Should such loan be done electronically?
Would it introduce any issue if the loan is given in cash to pay off a mortgage?
Would IRS see the cash as loan or income?
It doesn't matter how the funds are transferred.
It doesn't matter what the funds are used for.
Audits are extremely rare, and an audit where the IRS looks at a person's bank account to see if they have mystery income that was not declared on the tax return are the rarest type of all. If this will be a loan, the borrower and lenders should have a simple signed agreement that shows the amount of the loan, repayment terms and interest rate. That will be enough to prove to the IRS that the funds were from a loan and not from undeclared work of some kind.
