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Level 5

Question

Divorce Settlement

Forum|Forum|3 years ago
June 20, 2023
4 replies
12 views

My son divorce agreement states that Both parties agree that the Husband father let them borrow $16,000 to purchase the home and it is agreed that this sum shall be paid back to him from the proceeds of the sale of the propert/martial home.

The $16,000 was a gift to my son to purchase the home.

How will I report this on my 2023 income tax return?

Anonymous_

Level 15

@AndrewA87 wrote:
The $16,000 was a gift to my son to purchase the home.

Was it actually a gift or a loan?

You do not have to report gifts of a present interest that are $16,000 or less for the 2022 tax year ($17,000 or less for 2023).

See https://www.irs.gov/instructions/i709#en_US_2022_publink16784xd0e649

AndrewA87Author

Level 5

It was a gift.

I guess I am wondering since it was a gift and is being returned to me as a part of the sale of the house would it be considered income that needs to be reported.

Anonymous_

Level 15

@AndrewA87 wrote:
I guess I am wondering since it was a gift and is being returned to me as a part of the sale of the house would it be considered income that needs to be reported.

More details are still needed. It was not a gift if it was made with the advance understanding that the $16,000 would be returned to you at some point in the future.

True gifts are unconditional.

xmasbaby0

Level 15

Please explain what you are trying to do. Whose tax return are you preparing---your own or your son's? If you gave your son a gift of $16,000 it does not go on either your own income tax return or your son's tax return. If you gave your son a loan, that is different--so....which was it----a gift or a loan?

And....what do you mean by "the Husband father?" Is that someone else who also gave or loaned money to them?

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

AndrewA87Author

Level 5

I am concered about my 2023 income tax return. I gave my son $16,000 to help him purchase their house. Their divorce settelment states that the $16,000 is to be paid back to me. It was not a loan but a gift. Because it was a gift and not a loan would that be considered income from the sale of the house.

The mortgage papers says it was a gift but their divorce papers says it was a loan. We gave the money to them with no expectations of being repaid.

So if it was a loan how would that be reported?

Anonymous_

Level 15

@AndrewA87 wrote:
The mortgage papers says it was a gift but their divorce papers says it was a loan. We gave the money to them with no expectations of being repaid.

Based upon those facts, it was a gift and does not need to be reported on any income (or gift) tax return since it was within the annual exclusion for gifts of a present interest.

It would be difficult to imagine how you would be a party to your son's divorce (in the event anyone else raises that as an issue).

Opus 17

Level 15

We may need to know why the divorce agreement said it was a loan. Are there plans to sell the home, and if so, does your son actually plan to pay you $16,000 off the top before the proceeds are divided? If he does that, what would you do with the money (reinvest it? give it back to your son?)

AndrewA87Author

Level 5

d) Division of Sales Proceeds: Both parties agree that the Husbands father let them borrow Sixteen Thousand Dollars ($16,000) to purchase the home and it is agreed that this sum shall be paid back to him from the proceeds of the sale of the property/martial home before a division is made between the parties of any remaining proceeds from the sale of the marital property. At the closing of said sale, each party will be entitled to one-hale (1/2) of the "net sales proceeds" as define herein and shall direct the closing attorney or other responsible person to divide same the parties equal shares. For purposes of this Agreement, the term "net sales proceeds" shall mean the gross sales proceeds due the seller less the outstanding balance on the first mortgage, the sum of Sixteen Thousands Dollars ($16,000) owed to Husband father shall be paid off and commissions, taxes, or other expenses of the sale for which the sellers are liable.

When my son and his ex-wife bought the home the money was given as a gift.

But I wonder if the divorce settlement changed that?

Mike9241

Level 15

if it is to be paid back it's a loan not a gift. it doesn't really matter to you. nothing to report on your return. the amount is below the threshold requiring intertest. so, if no interest is being paid there is no reporting for either party. if interest is paid, to you it's income. but your son cannot deduct the interest payment unless these three items are true:

1) there's a signed document making the home security for the dept.

2) the instrument provides in the case of default the home could satisfy the debt

3) it's recorded or perfected under the laws

Mike9241