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    Dikirok's Avatar
    Dikirok Posts: 1, Reputation: 1
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    #1

    Jan 18, 2014, 09:52 PM
    What are the tax implications of lending my brother $75,000 in UK from the US?
    He is a contractor and is building his next house to sell. The banks are less willing these days to lend money but he has been doing this for years and has a great track record. Instead of borrowing 150,000 GBP with my money in hand he will only have to borrow 100,000 GBP which would be easier. If I charge no interest and he pays me back within a year or so, will either of us owe any taxes? Are there any restrictions on how much I can lend him before a form needs to be completed and if so how much and what form for what purpose?

    Thanks
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Jan 18, 2014, 10:11 PM
    The transfer of $75,000 is LESS than the amount that requires submission of Form 3520. That threshold is $100K.

    Not sure about U.K. taxes, but a loan of that size generally requires payment by your brother of some interest to you. Should the IRS discover the loan and see that no interest was charged, they will "impute" interest at market rates (say 6%) and determine you owe taxes on the $4,500 in interest that you should have collected.

    It is NOT likely that the IRS would find out about the loan, but they might.
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