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I am residing in USA. I am considering loaning USD 50K to my brother in Canada to help him buy a home. Whats the best way to go about this? I read that if its within US its best to do this a loan agreement and charge an interest. Since my brother (borrower) is in Canada, is this still the best way to loan him money.

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  • Would he pay you back in USD or CAD?
    – D Stanley
    Commented Nov 6, 2019 at 14:19
  • Signed contracts are always good. Are you really asking if there are any special requirements like (as @DStanley mentioned) specifying what currency to pay in?
    – RonJohn
    Commented Nov 6, 2019 at 14:24
  • he would payback in USD
    – user845
    Commented Nov 6, 2019 at 14:24
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    I guess my question is what documentation (IRS forms) are to be submitted to IRS both while giving the loan and when he pays back.
    – user845
    Commented Nov 6, 2019 at 14:27
  • Either give the money, or don't. Never lend to family. It does not end well.
    – Pete B.
    Commented Nov 6, 2019 at 17:10

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I guess my question is what documentation (IRS forms) are to be submitted to IRS both while giving the loan and when he pays back.

None.

In this case, it works on the honor system: since you'll be earning interest, and that will be income, you'll have to account for it on your 1040 (though I don't know exactly where, since TurboTax handles my taxes), even though you won't get a 1099 from him.

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  • Thank you, should I consult a CPA or a lawyer for appropriate paper work?
    – user845
    Commented Nov 6, 2019 at 19:10
  • I'd talk to your brother about wanting a contract, and why (mainly so there's no misunderstandings about who owes what and when), and talk in general about details like interest rate, term, frequency, which currency it'll be paid back in, and the consequences of not paying back (which is, I think, part of what makes a contract a contract instead of a gift). Then have a lawyer draft the contract, and have his lawyer look it over.
    – RonJohn
    Commented Nov 6, 2019 at 19:32
  • @PeterB is still right, though, that this is a potential minefield that can easily sour family relations (and have ripple effects, like if your mother is a bit too compassionate when your brother falls on hard times, can't pay you, and your mother sides with her poor baby) for decades.
    – RonJohn
    Commented Nov 6, 2019 at 19:35

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