Should I file a gift return if I loaned to friend but no promissory note

I loaned about 40K to a very close friend in 2021. There was no note or any documentation documented that is a loan. My friend probably would pay me back this year. There won't be any interest. Would I be safe to call it as a gift and file a 709 because I can't prove to IRS it is a loan since there is no documentation about the term, interest rate, collateral, etc.? I am fine to file a gift return since it is information return only.

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1 Best answer

Level 15

Mar 29, 2022 7:03:18 PM

If you do not expect repayment of the $40,000, then the transfer of funds is a gift and a gift tax return is required to be filed.

If you do expect repayment, then it is a loan and the applicable federal rate should be charged.

See https://www.irs.gov/applicable-federal-rates

Level 15

Mar 29, 2022 7:03:18 PM

If you do not expect repayment of the $40,000, then the transfer of funds is a gift and a gift tax return is required to be filed.

If you do expect repayment, then it is a loan and the applicable federal rate should be charged.

See https://www.irs.gov/applicable-federal-rates

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Should I file a gift return if I loaned to friend but no promissory note