@slamny wrote:
I read something on the web saying, "The loan must be legal and enforceable. Otherwise, it may be deemed a gift.", "If you don’t charge interest, the IRS can say the amount of interest you should have charged was a gift based on current tax rules", also "If the loan is interest-free or below the market interest rate, the IRS might consider the forgone i...".
Then should I file the gift tax form this year or should I wait until the IRS then I file form an amend gift tax form?
You have two choices.
1. It's a gift to her, then a gift back. You each file gift tax returns.
2. It's a loan. You aren't required to have any specific loan documents, but you are required to charge interest using at least the applicable federal minimum rate, and report the interest on your tax return. Even if you don't charge interest, you must report and pay tax on the interest income you would have received if you had charged interest.
The AFR for November 2024 is about 4%, so if you loan $200,000 for 4 months, you would be required to report $666 per month of taxable interest income, regardless of whether you charged her or not.
https://www.irs.gov/pub/irs-drop/rr-24-24.pdf
