Question

Loan to family member in Canada

Forum|Forum|6 years ago
November 6, 2019
1 reply
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I am residing in USA. I am considering loaning USD 50K to my brother in Canada to help him buy a home. Whats the best way to go about this? I read that if its within US its best to do this a loan agreement and charge an interest. Since my brother (borrower) is in Canada, is this still the best way to loan him money. What are my tax implications? What documentation (IRS forms) are to be submitted to IRS both while giving the loan and when he pays back.

A

Anonymous_

In short, you have to charge a certain amount of interest on the principal and, if you do not, the IRS will tax you as if you did (imputed interest at the AFR - applicable federal rate).

See https://turbotax.intuit.com/tax-tips/tax-payments/irs-tax-rules-for-imputed-interest/L7UbulHpC

You might want to consult, in-person, with a qualified professional who can draft the appropriate paperwork (loan docs) prior to proceeding with this transaction.