One of my family members abroad needs some short term liquidity. We're thinking I send money over, which they would give back in a few months and within a year.

Do I have to charge interest on this even though it is so short (3-6 months)? Would I have to pay any sort of taxes if there is no interest?

I know there's a gift tax exemption on about 12K USD and this applies to any "gift" interest (interest I don't charge below market rate interest), but I don't know if this applies to my situation.

Does anyone know where I can find this on the IRS website? I've been looking, but it's pretty hard to peruse past the gift tax part.

Don't forget to take into consideration bank to bank wire fees, and exhange fees. They can be considerable. That is over and above any taxes at either end... and coming back you have the same issues yet again.

And there is no way to avoid that part, Gift or not. And you do have to declare currency over a certain amount.

I can't comment on the actual taxes due as I've never moved ammounts that large. Local laws at the other end play into this don't forget. You didn't mention which country.

A loan is a LOAN, and a gift is a GIFT! If you send the money as a loan and charge interest, put it in writing and, if the IRS asks about it, show them the promissary note. Just be sure to pay taxes on the interest.

The issues about wiring fees are valid, but the U.S. government does NOT charge taxes on wire transfers.

Other countries, different story!

Quote:

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Originally Posted by AtlantaTaxExpert

A loan is a LOAN, and a gift is a GIFT! If you send the money as a loan and charge interest, put it in writing and, if the IRS asks about it, show them the promissary note. Just be sure to pay taxes on the interest.

The issues about wiring fees are valid, but the U.S. government does NOT charge taxes on wire transfers.

Other countries, different story!

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You have ot declare monitary instruments in excess of $10,000 leaving or entering the USA to customs... movements as low as $2,500 trigger banking notifications... over $5,000 different banking regulations notifying the government. Doesn't matter if it's a loan or between your own accounts. Or you bring the wrath and scruteny of big brother (the Feds, Treasury Dept, DEA and IRS) down on you. That's not a pleasant place to be even if you have never, ever done anything the slightest bit wrong... (and who hasn't at some point).

It can cost over 20% of the amount JUST for the bank transfer between countries (fees, currency exchange, etc)... and possibly more in some places (thats a close ballpark to wire money to a Bank in Italy from the USA)

And yeah... if it's a loan make sure its in writing... etc and the interest claimed as income... The IRS will be wanting to see that more likely than not with those ammounts.

If no interest is charged on the loan and it is below US$10,000, the IRS will not deem any interest charge or deem any gift. If the no-interest loan exceeds US$10,000, then interest will be deemed and a gift will be deemed. See section 7872.