CPA or EagleKeeper - question about 1-time cash gifts

[SunnyD]

My father is planning on giving us money to purchase a home here in FL. Now I know that 1-time cash gifts are tax exempt to a certain amount (as income). What is this amount?

Also, my mother-in-law seems to be under the impression that if this money is to be used in the purchase of a home, there is NO limit as to how much the gift amount would be - it would all be tax exempt.

Hook me up with the info moneyguys. :beer: &

 

[DaveSimmons]

There was a post on this a couple of months ago, the IRS form listed it as $1 million lifetime including inhertance. The tricky part is that for over $11K in one year you need to report it on your 1040 and apply the deducution, while under $11K you don't need to do a thing.

Hopefully CPA will confirm, since I'm a software developer and I've only read that IRS publication once.

 

[jyates]

I think you can get $10,000 per year as a gift without having to report it.

 

[DaveSimmons]

Originally posted by: jyates
I think you can get $10,000 per year as a gift without having to report it.

It was raised $1K to 11,000 recently, woot!

 

[jyates]

Originally posted by: DaveSimmons

Originally posted by: jyates
I think you can get $10,000 per year as a gift without having to report it.

It was raised $1K to 11,000 recently, woot!

That's great!

Now I'm only $11,000 away from maxing out this year!

 

[TitanDiddly]

That movie 'Shawshank Redemption' had something in it to do with giving larger sums of money tax-free, I think the trick has something to do with a spouse.

Of course, it's a movie.

 

[CPA]

A gift is taxable to the extent the amount is over 11K per donee per year. It is taxable to the donor, not you.

Exclusions:

1. Gifts that are not more than the annual exclusion for the calendar year.
2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3. Gifts to your spouse.
4. Gifts to a political organization for its use.


If your parents own their property together (which is usually the case), then they can give you $22K without tax implications.

I am unaware of the gift for mortgage exclusion, but I'll check around.

EDIT: Crap, I forgot that there is what's called a Unified Credit that can be applied to the donors gift and estate taxes. It's around $346K, but once they use it, they use it, meaning that if they gift you enough to get a tax bill of $346K, then they can no longer use this credit.

So, say they gift you $25K. They would have to pay taxes on $3K. Let's say the tax is 1K. They can apply the the unified credit against it and pay $0 taxes, but their unified credit is now $345K for the remaineder of their life. Oh, and they still have to file, though.

 

[DaveSimmons]

A gift is taxable to the extent the amount is over 11K per donee per year. It is taxable to the donor, not you.

had me going there ...

EDIT: Crap, I forgot that there is what's called a Unified Credit that can be applied to the donors gift and estate taxes

that's what I'd read about, though I thought the IRS pub had listed a higher number like $1 m. Short term memory is the frst to go

 

[CPA]

Originally posted by: DaveSimmons

A gift is taxable to the extent the amount is over 11K per donee per year. It is taxable to the donor, not you.

which is why you want the professional opinion not mine

You pay nothing, but your parents do?

This seems odd since the parents already paid taxes once on the income, I would have guessed that the gift would just not be tax-deductible, but no one claims our tax code is rational.

see my edit above, BUT gifts are definitely taxable to the DONOR, not the DONEE.

 

[andylawcc]

Originally posted by: CPA

see my edit above, BUT gifts are definitely taxable to the DONOR, not the DONEE.

so, if I give money to my son or a friend, I will be taxed?
let's say, I give 20k to him, and I have to pay some percentage of that amount to IRS?

 

[kaizersose]

why dont you just have your parents buy the house in their name and transfer the title to you? then you just pay them back over time.

 

[SunnyD]

Thanks for the replies guys, I'm just trying to figure out where I stand here.

My father will be giving me approximately $40,000 in order to start things off. Whether I find a home (in need of reconstruction) for that amount of if I have to use it as a down payment...

Anyway. Thanks.

 

[CPA]

Originally posted by: andylawcc

Originally posted by: CPA

see my edit above, BUT gifts are definitely taxable to the DONOR, not the DONEE.

so, if I give money to my son or a friend, I will be taxed?
let's say, I give 20k to him, and I have to pay some percentage of that amount to IRS?

Theoretically yes, but don't forget that you have the unified credit that can be applied to any tax owed. You will still have the file the form, form 790 I believe, so in the end you won't owe any tax.

 

[CPA]

Originally posted by: kaizersose
why dont you just have your parents buy the house in their name and transfer the title to you? then you just pay them back over time.

This is not always a good idea. The parents would have to to do one of two things: Either 1) If no interest was charged, then this is a gift in the year the house is purchesed, regardless if he pays them back or 2) Charge him interest and the parents claim the interest as passive income.

If the house is expensive enough, it could really eat into their unified credit, which portion would not be available to them when they die and leave their estate to the family.

 

[Zee]

Originally posted by: SunnyD
Thanks for the replies guys, I'm just trying to figure out where I stand here.

My father will be giving me approximately $40,000 in order to start things off. Whether I find a home (in need of reconstruction) for that amount of if I have to use it as a down payment...

Anyway. Thanks.

so you going to have him write a $11K check and get the rest in cash?

 

[SunnyD]

Originally posted by: Lazee

Originally posted by: SunnyD
Thanks for the replies guys, I'm just trying to figure out where I stand here.

My father will be giving me approximately $40,000 in order to start things off. Whether I find a home (in need of reconstruction) for that amount of if I have to use it as a down payment...

Anyway. Thanks.

so you going to have him write a $11K check and get the rest in cash?

And I'm sure the IRS is going to just skip over the balance of $29,000 in that transaction. :roll: HELLO!!?!!

 

[Zee]

Originally posted by: SunnyD

Originally posted by: Lazee

Originally posted by: SunnyD
Thanks for the replies guys, I'm just trying to figure out where I stand here.

My father will be giving me approximately $40,000 in order to start things off. Whether I find a home (in need of reconstruction) for that amount of if I have to use it as a down payment...

Anyway. Thanks.

so you going to have him write a $11K check and get the rest in cash?

And I'm sure the IRS is going to just skip over the balance of $29,000 in that transaction. :roll: HELLO!!?!!

:roll:

 

[dxkj]

i dont understand how the IRS can get you for your parents giving you 30k cash.

Is the burden on you to prove that you saved up that cash over 20 years and kept in a little box at home?

 

[TipsyMcStagger]

get your parents to write an 11k check to you, then an 11k check to your wife before the end of 2004. Then next year in January, get them to do it again, i suppose 9k check to you, and 9k to your wife.

So by some time in January 2005, you'll have the 40k and none of it taxable.

 

[Modeps]

Originally posted by: TipsyMcStagger
get your parents to write an 11k check to you, then an 11k check to your wife before the end of 2004. Then next year in January, get them to do it again, i suppose 9k check to you, and 9k to your wife.

So by some time in January 2005, you'll have the 40k and none of it taxable.

Apparently you didnt hear CPA.

If your parents own their property together (which is usually the case), then they can give you $22K without tax implications.

 

[EagleKeeper]

Gift l;imit is $11K per donor to donee per year.

Parents to a child can give $22K per year.
Unsure if child is married, if the spouse can also get another $22K - I suspect not.

However, there is nothing to prevent sibling to sibling donation.

Hypothetically then parents can donate $22K to each sibling. Then the other siblings donate either $11K or $22K(if married) to the luck SOB.

 

[Nuriko]

Eaglekeeper has the right of it. Basically, that's the best way(and by best I mean tax free for all involved).

 

[SunnyD]

For all intents, it's PARENT. Just my father. My mother has passed away a while ago. He has since remarried, but I'm sure his new wife would have reservations about him tossing money my way.

This money would be used solely to purchase or place down payment on a house. The only thing is I have no idea what the taxes or legallities of it is. That's why I ask.