Gift of a loan guarantee.
| Jurisdiction | United States |
| Author | Dunn, Lee |
| Date | 01 April 1999 |
To secure a bank business loan for a child, a parent may agree to guarantee the loan if the child fails to make the payments. Or, a parent may agree to guarantee his child's mortgage loan. The issue is whether these clients are making transfers subject to gift tax if they guarantee the loans for their children.
In each case, the child who needs the loan guarantee could go to a commercial surety and pay for a guarantee. When he turns to his parent for a free guarantee, is the parent conferring an interest in property subject to the gift tax? An argument against the imposition of gift tax on the initial guarantee centers on the consequences if the parent has to pay off the...
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