Tax Court Addresses The Validity of “Loans” From Family Members

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Estate of Bolles v. Comm’r, T.C. Memo. 2020-71 | June 1, 2020 | Goeke J. | Dkt. No. 4803-15

Short SummaryPetitioner sought a determination that advances from the decedent to her son were loans.

Key Issue:  Whether advances made by the decedent to her son were loans despite the lack of any loan agreements or attempts to force repayment.

Primary Holdings

Key Points of Law:

InsightThe Estate of Bolles case illustrates how courts will scrutinize advances to family members more deeply than in other scenarios.  Specifically, this case demonstrates that the Tax Court will only characterize advances to a family member as loans if there is an actual expectation of repayment and an intent to enforce the debt based upon the facts and circumstances.  In essence, the Tax Court can look to the financial condition of the family member receiving the advances to determine the “donor’s” expectation of repayment, and can bifurcate the characterization of the advances if the family member’s financial condition changes over time.


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