Monetary gift tax question


S

swreid5

My father-in-law is selling property and wants to give me, my husband
and daughter around $90,000 to $120,000 towards paying off bills and
buying a new home. I know that there will be tax required for him and
us, but what is the best way to go when handling this?
 
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S

Stuart Bronstein

My father-in-law is selling property and wants to give me, my
husband and daughter around $90,000 to $120,000 towards paying off
bills and buying a new home. I know that there will be tax
required for him and us, but what is the best way to go when
handling this?
If your father-in-law is married, he can give the three of you a total
of $72,000 without incurring any gift tax. One approach would be for
him to give you that much this year, and the balance on or after
January 1.

In any case, a gift tax will be incurred, but it's likely that no gift
tax will actually be owed yet. There is a lifetime exemption of
$1,000,000, and no tax is actually required to be paid until taxable
gifts exceed that amount.

Taxable gifts do get added back to a person's estate for estate tax
purposes after he dies, less gift tax paid.

Stu
 
B

Bill

(e-mail address removed) posted:
My father-in-law is selling property and wants
to give me, my husband and daughter around
$90,000 to $120,000 towards paying off bills
and buying a new home. I know that there will
be tax required for him and us, but what is the
best way to go when handling this?
On the contrary: a _gift_ is never taxable to the recipient! You, your
husband and your daughter will never have to declare any income for a
bona fide gift!

Now, your father-in-law has a different issue. He is free to give you,
your husband and your daughter _each_ $12,000 this year, and will face
no tax consequences whatsoever; _but_, when he tops the $12,000 limit,
there are issues that involve reports to the IRS, and consequences for
his estate.

These problems can be mitigated by spreading the gifts out over two
years (which would create a combined 2-year total of $72,000 that would
not require any reports) ... and there are also ways to "loan" the three
of you the difference between the original $36,000 that is not
reportable -- and the $90,000, which he _wants_ to give you, in total.

However, my advice would be that he consult with a professional tax
advisor, to make sure he sets the gifts up in such a way that he doesn't
run afoul of IRS regulations or the law.

You're lucky to have such a nice father-in-law; and you certainly
wouldn't want him to get in trouble, when he's just trying to be nice.

Bill
 
D

dpb

Stuart Bronstein wrote:
....
If your father-in-law is married, he can give the three of you a total
of $72,000 without incurring any gift tax. One approach would be for
him to give you that much this year, and the balance on or after
January 1.
Just for some additional clarification to OP...

That's also assuming the assets to be disposed of are in joint ownership
w/ his wife, of course, since the limit is $12K/year per person (both
donor and donee).

--
 
S

Stuart Bronstein

dpb said:
Stuart Bronstein wrote:
...

Just for some additional clarification to OP...

That's also assuming the assets to be disposed of are in joint
ownership w/ his wife, of course, since the limit is $12K/year per
person (both donor and donee).
No, that's absolutely incorrect. Even if all the property is owned by
one of the spouses, they can elect to treat it as if it came from each
equally. See IRC §2513.

Stu
 
J

joetaxpayer

Stuart said:
If your father-in-law is married, he can give the three of you a total
of $72,000 without incurring any gift tax. One approach would be for
him to give you that much this year, and the balance on or after
January 1.
Any complication or warning regarding the daughter? If she is a minor,
can the parents still accept that money and put it into the house, or
pay debts? As minor, does that daughter even have the legal right to
pass the gift along? And if she's an adult, isn't this the same question
we debated some time back? That you can't prearrange passing this kind
of money around?

Joe
 
S

Stuart Bronstein

joetaxpayer said:
Any complication or warning regarding the daughter? If she is a
minor, can the parents still accept that money and put it into the
house, or pay debts? As minor, does that daughter even have the
legal right to pass the gift along? And if she's an adult, isn't
this the same question we debated some time back? That you can't
prearrange passing this kind of money around?
If the daughter's a minor the parents can accept the gift on her
behalf, as long as they keep it for her and manage it prudently. It
would be best to have it in the name of a Uniform Gifts to Minors Act
trust, but it may not be necessary, probably depending on local state
law.

No, this has nothing to do with giving a gift to one person and having
that person gift it to another. This is one person making three
separate gifts. And if he's married, two people are treated as each
making three separate gifts.

Stu
 
R

removeps-groups

No, that's absolutely incorrect.  Even if all the property is owned by
one of the spouses, they can elect to treat it as if it came from each
equally.  See IRC §2513.
But in this case, is a gift tax return required to authorize the gift
splitting, though no gift tax will be due?
 
S

Stuart Bronstein

removeps-groups@yahoo.com said:
But in this case, is a gift tax return required to authorize the
gift splitting, though no gift tax will be due?
Yes. But not only will no tax be due, no tax will be incurred.

Stu
 
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D

dpb

Stuart said:
No, that's absolutely incorrect. Even if all the property is owned by
one of the spouses, they can elect to treat it as if it came from each
equally. See IRC §2513.
I stand corrected, sorry I'll go stand in my corner again... :(

--
 
S

swreid5

Any complication or warning regarding the daughter? If she is a minor,
can the parents still accept that money and put it into the house, or
pay debts? As minor, does that daughter even have the legal right to
pass the gift along? And if she's an adult, isn't this the same question
we debated some time back? That you can't prearrange passing this kind
of money around?

Joe
My daughter is not a minor, that may help, and yes, I do have a
wonderful father-in-law, I just want to make sure that there is no
unfair burden on him. Thank you everyone so far for you help, I
really do appreciate it!
 
K

kastnna

No, this has nothing to do with giving a gift to one person and having
that person gift it to another.  This is one person making three
separate gifts.  And if he's married, two people are treated as each
making three separate gifts.
But are the two parents going to use the daughter's money to pay-off
THEIR bills and buy THEIR house? That's kind of what it sounds like,
but I could be incorrect (and I think this may be what Joe was getting
at).

How does that benefit the daughter? Will the daughter have ownership
in the home?
 
S

Stuart Bronstein

kastnna said:
But are the two parents going to use the daughter's money to
pay-off THEIR bills and buy THEIR house? That's kind of what it
sounds like, but I could be incorrect (and I think this may be
what Joe was getting at).

How does that benefit the daughter? Will the daughter have
ownership in the home?
You're right, it can't be a sham. The daughter would have to be the
actual recipient. If the gift is of title to real property the
daughter should be listed on the deed. If it's of cash, the daughter
(over 21 as OP said) would have to have the money put into her own
name.

Stu
 
G

Gil Faver

You're right, it can't be a sham. The daughter would have to be the
actual recipient. If the gift is of title to real property the
daughter should be listed on the deed. If it's of cash, the daughter
(over 21 as OP said) would have to have the money put into her own
name.
or the daughter could start paying rent.
 
S

Stuart Bronstein

Gil Faver said:
or the daughter could start paying rent.
With the money she was given, because it can't have gone into the
property if her name wasn't on it somehow.

Stu
 
H

Han

(e-mail address removed) wrote in @x41g2000hsb.googlegroups.com:
My father-in-law is selling property and wants to give me, my husband
and daughter around $90,000 to $120,000 towards paying off bills and
buying a new home. I know that there will be tax required for him and
us, but what is the best way to go when handling this?
I'm no expert at all, but couldn't the father-in-law sell the property and
invest (part of) the proceeds in a new property (chosen by the family?) and
then gift the property in stages to them? Another part of the proceeds of
the sale could be a direct monetary gift to help them pay their debts.
 
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S

Stuart Bronstein

Han said:
(e-mail address removed) wrote in

I'm no expert at all, but couldn't the father-in-law sell the
property and invest (part of) the proceeds in a new property
(chosen by the family?) and then gift the property in stages to
them? Another part of the proceeds of the sale could be a direct
monetary gift to help them pay their debts.
Yes, that can work sometimes. The drawback is that the property would
have to be reappraised every year, and there's a cost to that. The
property would probably go up in value over time, so it would take more
time to transfer the entire amount.

On the other hand they won't have to worry about imputed interest if
they do it that way.

Stu
 

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