How do I report taxes for large sum of money (gift)?

Question

I have a relative that is giving me approximately $225K. The relative will be cashing in savings bonds. Some of the bonds have my name on them (around $50k), the rest just have the relative's name.

How does the taxes work in this situation. What is the relative's tax burden, and mine? How do we report it? Is there any way to avoid taxes (ie: one time gift allowance)?

I am in the state of Texas, so there is no State Tax. The relative is in Louisiana, so there is a State Tax.

Answer 1

For the bonds that have your name on them, you will be required to report as interest income the difference between the amount received and the amount paid for the bonds (usually 1/2 of the face value). Since they have your name on them they are legally yours, and there is no gift.

For the other bonds that don't have your name on them, the relative will have to report the interest income. You don't have to report anything, as gifts are not taxable to the recipient. However, the relative will have to file a gift tax return (Form 709) and utilize a portion of his/her unified credit.

Answer 2

As you are a resident of Texas you will have no state tax. You should set down with an accountant and provide exact figures to be worked with for the best answer to your question. The 50K in bonds with your name on them you will have to report the interest earned thereon under your name. The relatives will face the same thing on bonds cashed in in their name and social security number. I urge you to seek out an accountant for exact numbers type answer.

Answer 3

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