Legal Question in Tax Law in California

Promissory Note received by Minor

If a minor child receives a promissory note as a gift may the minor deduct the portion of the payment recovering the cost basis of the gift as the giftor previously did on his tax return?

Asked on 7/16/08, 2:52 pm

1 Answer from Attorneys

Jeb Burton The Burton Law Firm

Re: Promissory Note received by Minor

I think your question is a bit muddled... If the note that was gifted had a basis of "100 dollars" and was being paid back each year (10 dollars a year + interest). Then barring something strange, the amount received attributable to basis is not taxed (not a deduction, it is not income). The amount received attributable to income, is taxed. It doesn't matter who holds the note, if the note passes to a minor child, then barring the odd occurrence previously stated, they should have the same basis as the previous owner did..

I can't think of what deduction you could be referring to if what I said above does not apply.

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Answered on 7/16/08, 3:29 pm


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