[ddfkawka]

I am a green card holder and have been living in the US for 13 years - three years ago I have purchased a house in Poland for which I borrowed money from my father in Poland (he is Polish citizen only, not US resident in any manner). I have sold this house last year and I have reported capital gain on my 2010 return (sale price in PLN re-calculated in US$ based on exchange rate on date of sale - purchase price in PLN re-calculated in US$ based on exchange rate on the date of purchase) plus deduction for capital gain tax paid in Poland. Loan principal has been repaid to my father after sale. How this oversees loan would be treated by IRS? We did have a formal loan document written and signed on the day of purchase set with an annual set at 5% - does he need to pay any tax to IRS on those payments? Or it would better if we had an interest-free agreement?