If I repaid a monetary gift, is still considered a gift by the IRS?
My mother lent my husband & me 0K to close on our new house, but our mortgage broker made her sign a letter declaring the 0K a "gift," since he was concerned that our home loan wouldn't be approved otherwise.
Three weeks later, we repaid the 0, from the proceeds of the sale of our old home. Do we have to report this exchange to the IRS? --i.e. not have to declare each 0K as gifts?
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In a perfect world, I'd look at the facts, and say that you were gifted 3 weeks interest by your mom. A bit less than 0, with no consequences.
Your broker should lose his license. He counseled you (or your mother) to make a fraudulent statement.
A true gift would require a Form 709 to declare the gift, and use up part of the lifetime transfer amount, the .25M estate tax exclusion. A loan simply requires proper documentation, and interest declared by both parties. Mom would need to claim as income, and if she had lien on your house you get a deduction.
I wrote an article on The Step Transaction Doctrine, in which I describe how the IRS can collapse/combine multiple transactions and simply consider the results. I believe this applies to your situation.
(Note - Since posting this answer, I've passed the exam to sell real estate in my state. We are advised never to offer mortgage advice, that's what the banks are for. As I wrote, the broker risks his license for his advice.)
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