Do I have to file Gift Tax Return if I lend my daughter money and she give it back to me 3 or 4 months later

[slamny]

I lend my daughter 200K to open a bank checking & saving account for promotion bonus, she need to put the money in the account for 3 to 4 months. In return, she will get $1500 bonus from checking. She also will get 5% interest of 200K in saving. She will get a 1099 for the $1500 bonus as well as the 5% interest from her 200K savings, and she will keep the bonus and interest and return the money back to me.  I will get a $500 referal bonus which a 1099 will address to me. Since, she will give me back 200K after 3 or 4 months, do I have to file the Form 709? And, does she also has to file Form 709 when she give the money back to me?

[DoninGA]

Funds given that will be repaid are not a gift.

[xmasbaby0]

You are not giving your daughter a gift.   You are loaning money to her with the expectation that all of it is being paid back to you.   She will not be giving you a gift when she re-pays the loan.   So, no, there will not be a Form 709 gift tax form involved.

However, you need to be aware of imputed interest when you loan money to a family member.

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

[slamny]

I read something on the web saying, "The loan must be legal and enforceable. Otherwise, it may be deemed a gift.", "If you don’t charge interest, the IRS can say the amount of interest you should have charged was a gift based on current tax rules", also "If the loan is interest-free or below the market interest rate, the IRS might consider the forgone i...".

Then should I file the gift tax form this year  or should I wait until the IRS then  I file form an amend gift tax form?

[Opus 17]

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@slamny wrote:

I read something on the web saying, "The loan must be legal and enforceable. Otherwise, it may be deemed a gift.", "If you don’t charge interest, the IRS can say the amount of interest you should have charged was a gift based on current tax rules", also "If the loan is interest-free or below the market interest rate, the IRS might consider the forgone i...".

Then should I file the gift tax form this year  or should I wait until the IRS then  I file form an amend gift tax form?

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You have two choices.

1. It's a gift to her, then a gift back.  You each file gift tax returns.

2. It's a loan.  You aren't required to have any specific loan documents, but you are required to charge interest using at least the applicable federal minimum rate, and report the interest on your tax return.  Even if you don't charge interest, you must report and pay tax on the interest income you would have received if you had charged interest.  

The AFR for November 2024 is about 4%, so if you loan $200,000 for 4 months, you would be required to report $666 per month of taxable interest income, regardless of whether you charged her or not.  

https://www.irs.gov/pub/irs-drop/rr-24-24.pdf

[slamny]

Since, my daughter putting the money into the savings account, earning 5% interest, and she will get a 1099. It doesn't make sense to do the way of lending her money and charge her with AFR  4% interest, and I also have to report that interest as revenue on my return. "Double interest earning"

I will go for the  Gift option. Since, I have an liftime gift tax exclusion of  $13.61 million and don't have to pay gift taxes, would I have any penalty or interest not filing Form 709 in 2024 and wait until years later or get question by the IRS? Thanks.

[Opus 17]

@slamny 

The gift tax form is due the same time as a tax return, April 15, 2025 for a gift made in 2024.

There is a penalty for filing late.  It was suggested in another post that the penalty is a percentage of the tax owed, so there is no actual penalty if you are late filing a return that shows no tax.  But I would not recommend deliberately ignoring tax filing deadlines unless you have professional advice.