Seven hundred thousand dollars? Alrighty then..
Based on your alleged facts, you would be imputed interest income
at the federal
in effect on the date that the loan was originated, compounded semiannually. The amount of the loan is the excess of the amount transferred divided by the present value of the amount transferred. IRC 7872(b)(1).
If the federal long term rate were 3.25% on the date of transfer of the loan proceeds, then that means you would have transferred about $432,000. Of course, you must have made loans at various times over a long period of time, so as a practical matter, this will not work.
If your goal here is to set up and report income on the loan payments, then you may want to consider having your child
sign a promissory note with definite and certain terms. That way you wouldn't have to deal with the incredibly complicated vagaries of trying to figure out when each loan was made, and what the interest rate was at the time.
Then you would report the interest based upon the note as income, and that would be the end of the matter. However, $800 is not a realistic loan repayment for a $700,000 debt, unless you have a balloon payment at some reasonable future date. Otherwise, the loan duration would probably be in the neighborhood of 80 years.
Hope this helps.
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