Is it possible to gift $56k from one family (of 2) to another family (of 2) so that we can write 1 check from joint account and they can deposit into their joint account.

[abctx007]

my close friend requested to loan $50k for 6 months for homebuying and i dont want to charge interest and avoid IRS hassle..is it possible to gift $56k from one family (of 2) to another family (of 2) so that we can write 1 check from joint account and they can deposit into their joint account.

[ScruffyCurmudgeon]

Gifts that exceed the allowable excludable amount of $14,000 per year given by one person to one other person must be reported on Form 709 Gift Tax Return (not part of the Income Tax system).  So, in your situation, one could. Use the exclusion as follows.

A married couple, for example, holding a joint bank account could each create a gift of the $14,000 per each of the couple to each of the other two people, thus 2 X $14,000 X 2 = $56,000.

[Opus 17]

I have not seen anything in the tax code that says that 4 separate checks are required.  However, you may want to prepare a "gift letter" that details the arrangement, and keep a copy with your records.

Also beware, the lender will probably require a gift letter that says that the money is a gift and does not have to be repaid.  This is because the lender does not want the borrower to have additional undisclosed or secret loans.  If the home purchase has a problem, or if your friends' finances have a problem, or your relationship has a problem, they can use that gift letter to argue that they don't owe you any repayment.  It could make suing them very difficult.

[dmertz]

abctx007, note that if there are any strings attached it's not a gift, it's a loan, even if you do not charge your friend interest.  If it's a loan and you do not charge interest on a loan, you are still subject to the tax liability on imputed interest, a minimum amount under the tax code.

[abctx007]

Thank you all for your advice

[Opus 17]

Well yes, assuming they get caught.  The arrangement is questionable for many reasons, but that doesn't mean people don't do it all the time.

1. If it's a loan but the borrower hides it from the lender, it could be mortgage fraud.
2. If it's a loan, the IRS expect you to charge interest, and you owe income tax on the interest you would have received even if you don't charge interest.
3. If it's a loan and you issue a gift letter, you could be burned if the relationship goes sour.  You would also have no standing in bankruptcy court or with an insurance company if the borrowers had a sudden reversal of fortune through no fault of their own (job loss, catastrophic fire loss, earthquake, etc.).

Just know what you are getting into.