I need to loan money to a family member for a short term. He will pay back in approx. 3 months. Can I just transfer the money to him and then he will transfer it back to me or do we need to take any additional actions in order to avoid tax implications? The amount is 30 to 40K.
Technically, you do not absolutely need to take additional action, but you should memorialize the transaction in writing and use the Applicable Federal Rate for interest (which would amount to a very nominal sum for a three-month period).