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After researching online, I found many websites that said wire transfers are not reported to the IRS, but others said that they were reported. I just want to make sure that I do not have to pay taxes on a loan. I am planning on depositing this loan in a traditional brokerage account for investment purposes and I hope that the only time I need to pay taxes is when I sell the securities that I end up buying.

Are there any pitfalls that I should watch out for as far as taxes go by receiving a loan as a wire transfer? Also, how would I report capital gains on trades that I have made? Do I actually have to send every single trade I make to the government and show profits and losses on each trade?

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    Considering splitting this into two separate questions, one about loan reporting and one about reporting capital gains. These are two separate issues.
    – John Bensin
    Aug 28, 2013 at 17:46

2 Answers 2

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It may be reported to the Treasury (FinCen unit). Any cash transaction of over $10K is. In addition to the strict reporting requirements that the FinCen imposes, banks can report whatever they feel like if they think its suspicious.

Another thing to keep in mind is that the IRS might ask for a gift tax return from the payer, or a foreign gift report from you. While you claim this is a loan, it may not necessarily be seen as such by the IRS.

You need to have proper paperwork ready to show the source of the money if asked, and show that it is a bona fide loan, and that's it.

Also, how would I report capital gains on trades that I have made. Do I actually have to send every single trade I make to the government and show profits and losses on each trade?

Yes. That would be part of your schedule D or E on your yearly tax return.

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    +1 - once again, I learned something new - never heard of FinCen.
    – JTP - Apologise to Monica ♦
    Aug 28, 2013 at 23:39
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    Wait what? Currency Transaction Reports are the form for cash transactions over $10000 and are reported to the Treasury, and that ONLY is related to moving cash from the cash economy INTO the banking system, not moving money already in the banking system into different accounts. occ.gov/news-issuances/bulletins/2003/OCC2003-48a.pdf (see definition on "transaction in currency")
    – CQM
    Sep 2, 2013 at 0:44
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    @CQN from your link: "Who Must File. Each financial institution (other than a casino, which instead must file FinCEN Form 103, and the U.S. Postal Service for which there are separate rules) must file FinCEN Form 104 (formerly 4789) (CTR) for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000.". I understand that you downvoted me, but at least don't post a link proving that I'm right and you're wrong while doing that.
    – littleadv
    Sep 3, 2013 at 5:22
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    @littleadv you are misunderstanding what the definition of "transaction in currency" is, it is defined on page 3 "Transaction in Currency. The physical transfer of currency from one person to another. This does not include a transfer of funds by means of bank check, bank draft, wire transfer or other written order that does not involve the physical transfer of currency."
    – CQM
    Sep 3, 2013 at 23:09
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The personal loan is not reported to the IRS, and the mere fact of you receiving money does not inherently make it a taxable event.

The wire will not incure a Form 8300 to the IRS nor a Currency Transaction Report to the Treasury's FinCEN department (contrary to the accepted answer). Only in person cash to bank account (deposit), and bank account to cash (withdrawal) is reported via currency transaction reports.

http://www.occ.gov/news-issuances/bulletins/2003/OCC2003-48a.pdf (see definition on "transaction in currency") for convenience I have added the definition from page 3 here

"**Transaction in Currency**. The **physical** transfer of
 currency from one person to another. This does not
include a transfer of funds by means of bank check, bank
draft, wire transfer or other written order that does not
involve the physical transfer of currency."

Your broker should have some accounting tools to help keep track of your capital gains and losses. There are different tax rules for the kinds of securities and products you plan to trade, so there is not a one size fits all rule here. Futures are taxed 60% long term capital gains and 40% short term capital gains no matter the length of the trade. Stocks come with wash sale and cost basis accounting rules, and other derivatives like straddles have their own subsections in the IRS tax code.

The bigger concern here would be the structure of the loan you are investing. Since people investing other people's money are required to be licensed by the federal and state securities regulators.

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  • @darga33 Don't know where did my comment go, but to reiterate again - this is incorrect. See my response to him under my answer
    – littleadv
    Sep 3, 2013 at 17:48
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    @littleadv A moderator deleted your comment because it was rude. When you compose a comment, could you please stick to facts and avoid injecting scathing personal opinion? Thanks.
    – Chris W. Rea
    Sep 3, 2013 at 19:07

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