IRS 1274 Due Upfront on Hard Money Loan

18 Replies

I have a friend who has been in talks with a hard money lender. On a $400,000 Hard Money Loan.

He already received a PPI of $12,000 and now he stated now that my friend needs to pay 6% of the loan which is a 1274 Tax payment.

I've never heard of this.

What is a 1274 and why if it's a tax payment is it due Upfront?

@Kyle Affronti are you saying your friend paid this hard money lender 12k already?

There is no tax payment. This a scam. You don’t owe taxes on borrowed money.

Your friend has paid a scammer most likely and is out any money he gave them

Originally posted by @Caleb Heimsoth :

@Kyle Affronti are you saying your friend paid this hard money lender 12k already?

There is no tax payment. This a scam. You don’t owe taxes on borrowed money.

Your friend has paid a scammer most likely and is out any money he gave them 

Wow this is insane the thing these crooks think up.. IE insurance if you stop paying.. ( non of that is available in private HML ing) now use the IRS as some sort of threat for more money.. Geez this is so sad..

Originally posted by @Kyle Affronti :

@Caleb Heimsoth PPI is normal right? It's the 1274 that's not normal?

12k up front before the loan closes is NOT NORMAL in any Hardmoney loan..   credit report appraisal.. is about it.  500 to 700 maybe.

Originally posted by @Kyle Affronti :

@Caleb Heimsoth payment protection insurance is what the $12k was already paid to this guy for.

 Nope not normal.  Your friend is out that money and anymore he pays this guy.  This is all a scam.

Someone in some faraway country is likely enjoying that 12k right now. 

PPI as in “payment protection insurance”?  That is not a thing in the US. Your friend has been scammed, and as any good scammer will do....”well, since he fell for the fake insurance gig, let’s see if we can get him on the fake taxes gig”. 

I see they tried to actually be creative with this “section 1274 tax”....section 1274 deals with applying an Imputed interest rate (a minimum rate that the Receiver of installment payments will have to declare as interest income) to an installment loan that calls for a zero interest rate. This has nothing to do with borrowing hard money. 

Your friend has been scammed. Let me guess, he has never met with this lender at their office.....because it doesn’t exist. 

Originally posted by @Kyle Affronti :

@Caleb Heimsoth payment protection insurance is what the $12k was already paid to this guy for.

there is no such thing as payment protection insurance it does not exist.. they fool you because people are aware of PMI

Private mortgage insurance on federally regulated loans.. however for Hard money loans there is no such thing its simply a guy pretending to be a lender and stealing money.. nothing more nothing less he will steal as much as your friend will send him then go dark.

Originally posted by @Kyle Affronti :

I have forwarded this thread to my friend. I appreciate everyone's input and thank you so much for saving them from losing more. You are all greatly appreciate!

He owes you a beer or two.. he could have sent another 24k and been out 36k  at least you stopped the bleeding.

This is a scam, I am a hard money lender and this just sounds fishy. Stay away, definitely contact your council to handle this properly with the lender. You should be protected in these situations. 

I'm wondering whether your friend's next stop should be a chat with a lawyer or an accountant to find out if he or she has any recourse. Perhaps an legal letter of demand or the like?

Originally posted by @Benjamin Hurwitz:

I'm wondering whether your friend's next stop should be a chat with a lawyer or an accountant to find out if he or she has any recourse. Perhaps an legal letter of demand or the like?

Benjamin ,   these advanced fee scams have been going on for years and years..  google Ingrid Robinson  Remington financial American Greed.

this version these are off shore crooks or if they are here you will NEVER find them.. you can file a complaint with the AG's office is probably all you can do.. but to spend money on an attorney I pretty much guarantee you will just be more money down the drain. 

My Dad showed me these scammers in the mid to late 70s when I was a young agent.. and learning my way through it.