Family matters – Are cash advances gifts or loans for tax purposes?

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Abstract: When friends and family members are struggling to make ends meet — like during the COVID-19 crisis — loved ones may give or lend money to help. However, it’s important to understand whether a client’s transfers will be classified as gifts or loans for tax purposes. This article summarizes a recent U.S. Tax Court case that highlights how the determination is made and how changes in circumstances may lead to different classifications for subsequent transfers. A sidebar highlights a gift tax case where value was determined by the transfer document, not the donor’s intent. Estate of Bolles v. Commissioner, T.C. Memo. 2020-71 (Tax Ct. June 1, 2020) Nelson v. Commissioner, T.C. Memo. 2020-81 (Tax Ct. June 10, 2020)