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[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]

As you recognized, the fact that the gift does not equal enough to "trigger federal gift tax" does not mean you don't need to report it. Where you are wrong, however, is that you don't need to gift $14 million to be taxed. A transfer of $14 million is what is relevant, not just gifts --and that is going to include any transfers at death. If someone is going to be transferring over 14M, or thinks they might, whether in gifts or at death, or both, there are strategies, such as loaning the money as OP is considering, that can be put into place. But it is complicated, and like I said, you want a lawyer to look that over.

But yeah, OP, if you are never going to have anything near $14M to transfer, you can just report the gift and not get all wrapped up in avoiding taxes. Unless, as PP points out, you are in a state with gift tax that might kick in. [/quote]

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