How to send $73,000 back to a family member the right way?

[charlieincharge78]

a couple years ago, i made a direct payment to my parents mortgage for 73,000 to pay the house off.  so the money went straight from my checking account to their mortgage account.  So no loans of any kind were involved.  

they are in a better situation now and want to give that money back to me.   No interest or anything will be paid back to me of course.  they just want to send that exact amount back to me but are unsure how to without it complicating tax issues or the IRS thinking its some kind of gift and have to pay taxes on it.   the $73k that i paid to them was already taxed as it was part of my existings savings.   do they just simply wire me the whole amount or write a check, or is there more to it than that to simply give back what was already mine to begin with.

[Bsch4477]

Your $73,000 was a gift to them.  You should have filed a gift tax Form 709 to report that.  When they give you that amount they would do the same. No tax would be owed by either of you. 

[charlieincharge78]

assuming that was done, they can just wire back the whole amount in one large sum without incident and don't have to do anything tricky like sending smaller amounts?

[tagteam · Accepted solution]

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@charlieincharge78 wrote:

assuming that was done, they can just wire back the whole amount in one large sum without incident and don't have to do anything tricky like sending smaller amounts?

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Technically, that would be considered a gift from your parents to you (or the repayment of a below-market rate loan - where there would be imputed interest). 

Your parents could wire $30,000 this year (2020), another $30,000 next year, and then the balance the following year without filing a Form 709 with the IRS. However, if you have a spouse and/or children, your parents could each wire you, and your spouse and child or children, $15,000 without filing anything with the IRS.

[Anonymous]

this is a thorny situation.   if you made a gift to them, at that time you should have filed a gift tax return.  so was it intended to be a gift or a loan? there could be an issue because "gifts" aren't repaid.   if they pay you back in a lump sum they should file a gift tax return. 

if the IRS were to examine what took place they might argue that what you really did was make an interest free gift loan (IRC SEC 7872) to your parents which under the tax rules would have required you to report imputed interest each year. 

[charlieincharge78]

yeah, was a gift.. no intention of receiving back but now they want to