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andrewlee6
New Member

Loan to child for $ 800,000.00

Hi,
What are the tax consequences for both myself and my child if I loan the child $ 800,000.00 to start a business for himself.
8 Replies
Opus 17
Level 15

Loan to child for $ 800,000.00

You can make a gift without paying gift tax although it needs to be reported, and your child can make gifts back.

If you treat it as a loan, the IRS expects you to conduct your business affairs in a businesslike manner, which means charging interest.  If you don't charge interest, or charge less than the minimum rate, the IRS will require to pay tax on the interest income you would have received if you charged at least the minimum rate ("imputed interest").  See this video.

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

If you do charge interest, your child can deduct the interest as a business expense.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
andrewlee6
New Member

Loan to child for $ 800,000.00

what amount is the gift tax for the amount of $ 800,000.00
Opus 17
Level 15

Loan to child for $ 800,000.00

You have to report a gift of more than $14,000 per person per year.  No gift tax is actually owed unless your lifetime total of gifts given is more than $5.4 million.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
SweetieJean
Level 15

Loan to child for $ 800,000.00

If you charge interest, you must report that interest as income. You and your child may wish to see a local professional to explore options, such as an equity investment.
andrewlee6
New Member

Loan to child for $ 800,000.00

can you explain more in detail about equity investment ?
SweetieJean
Level 15

Loan to child for $ 800,000.00

andrewlee6
New Member

Loan to child for $ 800,000.00

what would you recommend to avoid paying the least taxes for myself and my child to give my child
$ 800,000.00
SweetieJean
Level 15

Loan to child for $ 800,000.00

We cannot investment or legal advice here,.
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