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February 22, 2023
Question

Loan to individual to buy rental property with payoff

  • February 22, 2023
  • 1 reply
  • 0 views

Person A loans $50K to Person B in 2020 which was used to buy rental property solely in Person B's name.  Income/expenses related to rental property were shared in 2020, 2021, and 2022.   Person A decided to close out arrangement in late 2022 with the following agreement.

  • $45K in stock received from Person B in 2022.
  • $15K cash to be received from Person B in 2023.
  • $15K cash to be received from Person B in 2024.

Looking for confirmation on the following:

  • For 2020 and 2021 the net of Inc/Exp should have been listed on taxes as Interest gain from loan, even though they are from rental property, but there is no true ownership in property.
  • For 2022 Inc/Exp net would be stated as interest, and $45K value of stock would reduce loan balance to $5K.
  • For 2023 the $15K payoff could be split as $2500 to loan payoff, and $12500K to interest gain.
  • For 2024 the $15K payoff could be split as $2500 to loan payoff, and $12500K to interest gain.

    1 reply

    February 22, 2023

    You are correct on all of those four points.  

     

    @WallyTheDog 

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