Ex Post Facto Note for family loan


J

jhhtexas

I have a client in audit. He has unclaimed income on his bank
statement for the year in question which he says is an informal
family loan from his father-in-law. He is now preparing a formal note
showing he borrowed the money at market interest and stipulating
payback terms and conditions. I cannot find in IRS regulations on
family loan requirements that the note must be in place before the
loan is given. Will he survive the audit with an ex post facto note a
year late?
 
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S

Stuart A. Bronstein

jhhtexas said:
I have a client in audit. He has unclaimed income on his bank
statement for the year in question which he says is an informal
family loan from his father-in-law. He is now preparing a formal
note showing he borrowed the money at market interest and
stipulating payback terms and conditions. I cannot find in IRS
regulations on family loan requirements that the note must be in
place before the loan is given. Will he survive the audit with
an ex post facto note a year late?
There is no such requirement that I'm aware of. If it was set up
originally as a loan and they are just creating documentation to
conform to the original agreement, I don't see any problem with it.
You could even date the documentation "as of" the date it was
actually done, as long as you don't back-date something official like
a notarization.
 

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