Recent Case Evaluates Whether Mom’s Transfer To Son Was A Loan Or Gift

Originally posted to Forbes.com

A very common family transaction is the transfer of funds to a child or other heir. How that ubiquitous matter is handled is key to the tax and legal consequences. A recent case held that the transfer was a loan, not a gift, which was a positive tax result for the taxpayer. Estate of Barbara Galli et al. v. Comr.., T.C., No. 7003-20. The Galli Court referred to a seminal loan characterization case in its analysis: Miller v. Commissioner, 71 T.C.M. (CCH) 1674 (1996). But the lessons and planning opportunities from the Galli case for families go well beyond the facts in this case, and those will be explored as well.

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