Other financial discussions

In short, you have to charge a certain amount of interest on the principal and, if you do not, the IRS will tax you as if you did (imputed interest at the AFR - applicable federal rate).

 

See https://turbotax.intuit.com/tax-tips/tax-payments/irs-tax-rules-for-imputed-interest/L7UbulHpC

 

You might want to consult, in-person, with a qualified professional who can draft the appropriate paperwork (loan  docs) prior to proceeding with this transaction.