Reply to Gift Tax Q

Forum Index » Money and Finances

Reply to "Gift Tax Q"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Why don't you and your spouse just gift him the $38k each year? No reporting necessary since it is within the annual gift tax exclusion amount. [/quote]

That's the plan but the need is upfront. I used $75K as an example, but what if it were a $3-400K? It will take several years to gift away @$38K/year. Will the IRS look at the transfer in 2025 and whine about it later? Do I need to cya with a loan agreement?, etc..[/quote]

Are you asking if you can gift your child about 300k or more, pretend it is a loan, and avoid gift tax? Is that what you are really asking here? If so the answer is an easy "no."

If you want to actually loan your kid money that is above the amount of the gift tax exclusion, then you need to create loan documents, and actually charge an amount at or above the applicable federal rate set by the IRS (and what that rate is will depend on the length of the loan). Charging a rate below this can be foregone interest that = a gift. And then you need to actually collect payments. Want to create documentation that pretends to actually collect the payments? Well, that's arguably the crime of tax evasion. There are lifetime exemptions available though, which you can look into, but you do need to report those.

Bottom line, if you are transferring 300 to 400k or so, especially to a relative, consult a tax attorney. This stuff gets complicated. There may be ways to transfer the money that avoids gift tax, or if not there may be ways to minimize it. But even if you can't minimize it in some way, you really want to do this properly.

You don't want to mess with the IRS. This is something I know.

[/quote]

Well, an amount that small won't trigger federal gift tax.  All you need to do is fill out the reporting form to track the total lifetime amount gifted.

https://www.irs.gov/forms-pubs/about-form-709

It's wild how little people understand about this, and keep conflating the annual exclusion amount ($19k/year/giftor to a single giftee) and the actual amount at which gift tax would be due (giving over $14 million in a lifetime).

Now, state gift taxes are different![/quote]

Correct. You could write a check for $1M and give it to them annually for 13 years before triggering gift tax concerns on year 14. Our just give $13M outright now.

No concerns at all with 75k, 300k numbers mentioned here.

If you want it to be repaid, set up a loan agreement.

If not, just gift them a check. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics