ok i want to give my grandchild $120,000 but i dont want to pay the gift tax (who does?)
is this legal: can 10 of my familiy members plus my grandchild and me go to a bank where i give each of the 10 a check for $12,000. then they turn around and sign the check over to my grand child. now we all avoid the gift tax.
i know the spirit of the law. and this is kind of an abuse of the "letter of the law", but the letter of the law seems to alow for this. will I (we) get in trouble?
2007-12-31 15:46:38 · 5 answers · asked by viajero_intergalactico 6 in Business & Finance ➔ Taxes ➔ United States
No, that won't work, since the money you are giving them isn't a bona-fide gift since you are requiring them to immediately hand it over to someone else. In this case, the money you are giving each of them is INCOME to them and they must claim it on their tax returns and pay income taxes on it.
If you are going to make a one-time gift of $120k to your grandchild and have not used up your $1,000,000 lifetime exclusion amount there won't be any gift taxes to pay anyway so save everyone a major headache with the IRS and give half of it today and half of it tomorrow and you'll only use $96,000 of your lifetime exclusion instead of doing it all in one year and using up $108,000 of it.
2007-12-31 15:59:41 · answer #1 · answered by Bostonian In MO 7 · 1⤊ 1⤋
Not legally. If you gave them each a check for $10K and at some later time, they gave $10K to your grandchild, you might slip under the radar and get away with it.
But unless you have already in your lifetime given away $1 million in gifts over the limit for the year you gave them in, you'd still have to file a gift tax return if you gave your grandchild $120K but you wouldn't owe any tax on the gift.
2008-01-01 12:56:36 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
To avoid gift tax filing requirement, give $12,000 each year to your grandchild.
2008-01-01 01:24:22 · answer #3 · answered by MukatA 6 · 0⤊ 0⤋
I would guess that each of the individual family members would have to deposit the check into their checking account and let it clear. Then since it was a gift there would be no tax consequence, next each would write a check to the grandchild and that would also be a gift and should not be taxable. Good luck, I hope this works for you. The government should have no say about to whom you give your money. You won't get into any trouble, but they may disallow it and then you would have to pay the tax on the money. The person that gives the gift pays the tax not the person that receives it.
2008-01-01 00:03:59 · answer #4 · answered by usrealestatedepot 1 · 0⤊ 4⤋
Form over substance, the IRS will figure this out. Since the $12K didn't stay with any of the 10, it doesn't count as a gift to them. (The IRS figured out that grandparents were leaving money to their grandchildren to avoid having the money eaten up by estate taxes when the middle generation died and came up with a generation-skipping-tax, so this is small potatoes.)
You do understand that unless you've already given away $1 Million in gifts, you don't actually write a check to the IRS, right?
2007-12-31 23:57:35 · answer #5 · answered by Anonymous · 4⤊ 0⤋