I am considering giving loan to my son for purchase of his home. The loan will be secured by his home as a collateral. I will have promissory note from to me mortgage interest at the market rate. Let us say this interest is $16k per year.
Now, instead of actually getting the interest from him, I “forgive” this interest as an annual gift to him. As per irs rules I am allowed to give upto $16k gift without incurring gift tax.
Question: does the interest that he was supposed to pay me becomes income for me that I have to report on my income tax? Note that I never really received the interest from him. My concern is: Does IRS treat it as if I received the interest any way?
