What is the tax owed from a brother trading?

Forum|Forum|4 years ago
May 4, 2022
1 reply
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Hi,

I wrote a check to my brother who is a day trader several years ago. He traded under his own account and has file and paid all the taxes on his trading account. Now, he is writing me a big check for the principle and profit. Do I need to pay taxes on the profit since he has already paid tax on it? If so, where in turbotax do I enter this in?

Thanks.

Not A Product Question

Mike9241

Level 15

how did your brother treat the "profit" payment on his return? regardless, the IRS could consider it interest he's paying you on the loan. I'm guessing there was no formal documentation for the money you advanced. I doubt the IRS would ever treat the profit portion as a gift because there are tax laws dealing with loans, especially family loans that do not specify an interest factor. your bother probably is entitled to some sort of deduction for the profit he gave you. whether he takes it or not is his problem. your problem is you got repaid more than you lent. backdated documents could be regarded as fraudulent.

Mike9241

txrookieAuthor

Level 2

Thanks for the reply Mike. Why would it be considered a loan and not an investment and I just need to paid the capital gains? Does the IRS not treated the same as having him managed my account?

Thanks.