Can my mom loan me a large sum of money to trade stocks in an account in my name w/o it being officialy a gift

Question

I want to add her money to my money in a stock trading account. I would pay the taxes on the gains but then give her a certain amount each month like she is currently getting from her IRA account. I don't want her money in my account to be a gift, it's still her money but we would both get a benefit of being able to diversify more with more capital combined. Any thoughts on if this can be legally done or any hidden tax consequences? She would have to close her current IRA and send the money into my account. I know she'll have to pay taxes on the IRA withdraw but it'll happen sooner or later. Thanks.

Answer 1

You are making this too difficult.

First, you already know she has to pay the tax if she takes it out. You could leave it in, consider them combined, and achieve the same diversification if she has a self-directed IRA.

But... that is not what you presented. I suppose you know that she can gift you up to $12,000 per year without there being a gift tax or need for a gift tax return.

The real answer: a loan is a loan, not a gift. She can loan you billions of dollars and it is not a gift. Sign a note for the amount to verify the loan if anyone should ever ask. If interest is to be charged on the loan, pay it to her (taxable to her, write-off to you) to substantiate the integrity of the loan - a paper trail.

Answer 2

she will also loose future tax deferral which can be very valuable and take a lump sum which could mean she will be in a higher tax bracket than she other wise would be in. I would advise against this.

You can however do this, I am not sure of the machanics but you would essentially set up the account as a partnership and define the percentage of ownership each of you has. You would then split the taxes according to the percentage of ownership. As distributions or additions are made by either of you an adjustment would be made in the ownership percentages each of you has. The other way you could do this is to have her loan you the money but this would have to be done with a loan contract and you would owe her a set interest rate regardless of the accounts performance. You would need to pay this and keep a record because if you or her are audited by the IRS and you have not paid according to the agreement, which by the way must be "market rate" interest, it will be converted into a gift or a loan loss by the IRS. A loan loss by your mother would be income to you an a loss to her treated as negative income. The way you describe could not be done since this would be a gift to you from your mother and then you gifting her back in the sequential years. Consult an accountant before you do anything.

Answer 3

This is her IRA money, and you want to trade with it? What if you lose money? What's she going to live on then? Business between relatives is generally a bad idea.

Anyway, she can gift you $12,000 a year without penalty, and if it's more than that, it can go toward a lifetime gift amount, which is over $600,000. However, you need to be very, very sure you know what you're doing, as you could cost her her entire retirement money. What makes you think you're all that?

Answer 4

you could make up the fact that you did some bogus service for her..like you earned it by being a house keeper for her..you know how it goes, and of course you will have to get her to fib, and make false documentations, and if I am not mistaken even pay taxes on the amount acquired to be considered legit. good luck :)