Allow us to share with your these 28 Free Promissory Note Templates in MS Word and PDF format to assist you.
Promissory note an important legal document that is written in favor of one party in order to protect his/her rights. It is an unconditional promise to pay back another person at a specific time. It is considered as legal binding but you cannot call it a contract as there is no condition like traditional contracts. This note legally binds one person to repay a specific amount of money to other individual on a specific date. These are made by banks, financial institutions, landlords or family as well as friends as a legal insurance to payback loaned money. It is usually contains date on which promissory note is written, future payment date, payment terms and conditions, total amount and sign of both parties. It is considered as a safest way to borrow money because with the help of promissory note you will get legal support for the repayment of money.
Reasons to Write Promissory Note
There are lots of reasons for which a promissory note is required and some of these reasons are as under:
- Promissory note is simple used to memorialize an oral agreement between two individual because through this note one individual make promise to payback other individual.
- Promissory note is also written during real estate transactions in order to ensure payment on right time.
- Promissory note is frequently used by self-employed persons who seeks to obtain a mortgage to purchase property but due to some reasons they are unable to qualify for the mortgage. In such situations, the buyer signs a note and the seller holds the mortgage. It is a written promise from buyer to seller for the payment of amount according to terms on right time.
- Promissory notes are also used by different corporations who want to increase the line of credit because it is most secure way to get payment.
- If you want to pay loan to your friend or any relative then use of promissory note will protect your loan as promissory note will legally bind the debtor to repay your full amount on determined time according to terms and conditions.
- Writer of promissory note often consider the financial situation of debtor and set payment terms and conditions according to it, for example if the financial state of debtor is not good then he/she can repay debt in installment.
- Promissory note is typically written while lending money to other person. Through promissory note you can get legal support and insurance to get your money back on specific period of time according to terms and conditions.
Free Promissory Note Templates
It is always an easy way to prepare documents if you get your hands on some sample documents. After reviewing following 28 free Promissory Notes Templates & Samples, anyone can easily write his/her own legal Promissory Note easily.
Here are some Promissory Notes Templates to download.
Promissory Note Valuation – Important Tax Consequences
At very first blush, the Fair Market Value (FMV) of a promissory note, guaranteed or unsecured, appears to be easily determined. The internal revenue service (IRS) Treasury regulations think its price to be the outstanding key, plus any accrued interest and later part of the costs to your time of valuation. To value the note on the cheap, satisfactory proof needs to be submitted. The research when it comes to lesser valuation can be same or higher elements such as: the interest rate, payment quantity, payment regularity, period, collateral security, payment record, or perhaps the borrower’s credit standing.
A competent promissory note appraiser may establish a reduced worth or also a worth of zero-worthless; the lower FMV lowers the note’s nonexempt valuation. This reality is perhaps not extensively known, also to numerous CPA’s and lawyers, but, it has great value into the person spending unneeded taxes.
Fair Marketplace Value Differs from Book Value :
Book worth, expense, and delinquent stability owed are all accurate historical facts. Their particular reliability is certainly perhaps not in dispute. But, FMV (the IRS’s preferred meaning) is concerned with the note’s “market value”, its existing salable value, not its historical price or its unpaid balance. These two points of view result in two values for exactly the same promissory note. Just one worth is the right one for taxation purposes.
Fair Marketplace Value Defined :
The meaning, as defined by IRS Regulation area 1.170A-1(c)(2), is “the cost at which home would change hands between a willing customer and a ready seller, neither being under any compulsion to buy or to sell and both having reasonable understanding of relevant facts.”
Taxation Implications :
A taxable event can be any of many happenings. Examples are the sale of a note, the rolling of a note from a conventional IRA account into a Roth IRA account, the gifting of a note, or perhaps the need to value a note in an estate or a trust. In all of the circumstances the historic expense, the guide worth, or perhaps the unpaid balance of the note may vary substantially from the current Fair marketplace Value. Typically, the FMV is considerably less than book worth, and the taxation would be substantially less.
General Conclusions :
- The Fair Market worth of a promissory note is generally not as much as its unpaid balance plus accrued interest
- The IRS calculates a lot of taxes on Fair Market Value, not on cost or book worth.
- Numerous CPA’s and attorneys are unaware that promissory records are not “valued” at whatever they seem to be; usually they over-value the note and over-pay the taxation.
- Valuation is determined according to the definition and also the evidence.
- A knowledge, qualified promissory note appraiser can create a Fair marketplace Value report that comports aided by the IRS definition and regulations. The Fair marketplace Value is generally less than its guide value.