Money Gifting

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mprince_IHB

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I'm hoping somebody with a tax background can answer this for me. My father in law is going to give us a large sum of money so that my wife and I can buy a house. I was wondering if anyone knows what the tax implications would be?
 
[quote author="mprince" date=1250848102]I'm hoping somebody with a tax background can answer this for me. My father in law is going to give us a large sum of money so that my wife and I can buy a house. I was wondering if anyone knows what the tax implications would be?</blockquote>


That one's wide open. You may find the info you seek here: <a href="http://www.irs.gov/publications/p950/ar01.html"><strong>www.irs.gov (Publication 950)</strong></a>



Public service question: Does your wife have any single sisters?



-IR2
 
[quote author="mprince" date=1250848102]I'm hoping somebody with a tax background can answer this for me. My father in law is going to give us a large sum of money so that my wife and I can buy a house. I was wondering if anyone knows what the tax implications would be?</blockquote>
You might want to set up a Trust and he puts the money into the Trust. Then the Trust could buy the home (especially if you'll be paying all cash). If your father in-law gifts you over a certain amount of money it will be a taxable event....you might want to talk to a financial advisor about the setting up the Trust and to see if it might be a viable option for you guys.
 
I'm not a CPA but this is my understanding of how gifting works:



An individual can give $13,000 per year to as many people as they like. A gift tax return is suppose to be filed even if no tax is owed. That same individual has a lifetime exclusion of 1 million dollars. Your allocated $13,000 per year exclusions do not count against your lifetime exclusion. For example, your father in law gives one individual $50,000 in 2009 so $36,000 of it will go against his lifetime exclusion.



If your father-in-law has not used up any of his lifetime exclusion he could give you a million dollars and no tax would be owed.



If your father-in-law is married. For 2009 he could gift $13,000 to his daughter, $13,000 to you, and the spouse can do the same. So there is $52,000. Do it all over on Jan 1 2010 and you have another $52,000. If he is giving more then he could use the lifetime exclusion if available.



Edit: Thanks Joon B
 
[quote author="mprince" date=1250848102]I'm hoping somebody with a tax background can answer this for me. My father in law is going to give us a large sum of money so that my wife and I can buy a house. I was wondering if anyone knows what the tax implications would be?</blockquote>


Are you a Caucasian with an Asian wife by any chance?
 
[quote author="awgee" date=1250855790]McDonna's answer is close enough.</blockquote>


To get around the gift being taxed can the parents loan the money to the daughter/husband and then gift them 52K/year in the form of debt forgiveness? Or would that be considered debt forgiveness income, if it is debt forgiveness income then couldnt the parents just gift them 52K/year and the daughter/husband just use that to pay back the parents? Seems like this could be a workaround, but im not a tax pro like awgee.



What about having the parents buy the home with the daughter/husband then having the parents quit claim the deed to the kids? This seems like it would be taxable.
 
[quote author="qwerty" date=1250857807][quote author="awgee" date=1250855790]McDonna's answer is close enough.</blockquote>


To get around the gift being taxed can the parents loan the money to the daughter/husband and then gift them 52K/year in the form of debt forgiveness? Or would that be considered debt forgiveness income, if it is debt forgiveness income then couldnt the parents just gift them 52K/year and the daughter/husband just use that to pay back the parents? Seems like this could be a workaround, but im not a tax pro like awgee.



What about having the parents buy the home with the daughter/husband then having the parents quit claim the deed to the kids? This seems like it would be taxable.</blockquote>


Quitclaiming is a gift and gift tax code applies.

What do you need a work around for? The $1,000,000 exemption aint enough?
 
[quote author="awgee" date=1250888363][quote author="qwerty" date=1250857807][quote author="awgee" date=1250855790]McDonna's answer is close enough.</blockquote>


To get around the gift being taxed can the parents loan the money to the daughter/husband and then gift them 52K/year in the form of debt forgiveness? Or would that be considered debt forgiveness income, if it is debt forgiveness income then couldnt the parents just gift them 52K/year and the daughter/husband just use that to pay back the parents? Seems like this could be a workaround, but im not a tax pro like awgee.



What about having the parents buy the home with the daughter/husband then having the parents quit claim the deed to the kids? This seems like it would be taxable.</blockquote>


Quitclaiming is a gift and gift tax code applies.

What do you need a work around for? The $1,000,000 exemption aint enough?</blockquote>


No kidding. If you or your family is rich enough that they've already given a million dollars to family members-will you adopt me?



That lifetime limit of a million means that even rather generous people will never have to pay gift tax.
 
If you look at the link IrvineRealtor posted to the IRS it appears your wouldn't have to pay any taxes on the money gifted to a child. No matter what the amount is.
 
[quote author="awgee" date=1250888363][quote author="qwerty" date=1250857807][quote author="awgee" date=1250855790]McDonna's answer is close enough.</blockquote>


To get around the gift being taxed can the parents loan the money to the daughter/husband and then gift them 52K/year in the form of debt forgiveness? Or would that be considered debt forgiveness income, if it is debt forgiveness income then couldnt the parents just gift them 52K/year and the daughter/husband just use that to pay back the parents? Seems like this could be a workaround, but im not a tax pro like awgee.



What about having the parents buy the home with the daughter/husband then having the parents quit claim the deed to the kids? This seems like it would be taxable.</blockquote>


Quitclaiming is a gift and gift tax code applies.

What do you need a work around for? The $1,000,000 exemption aint enough?</blockquote>


One million is probably enough, i was just curious if the work around would work, thats all.
 
[quote author="mprince" date=1250908755]If you look at the link IrvineRealtor posted to the IRS it appears your wouldn't have to pay any taxes on the money gifted to a child. No matter what the amount is.</blockquote>






Even to your child, the lifetime gift tax exemption is "only" $1,000,000 per spouse.
 
[quote author="Minimorty" date=1250909689][quote author="mprince" date=1250908755]If you look at the link IrvineRealtor posted to the IRS it appears your wouldn't have to pay any taxes on the money gifted to a child. No matter what the amount is.</blockquote>






Even to your child, the lifetime gift tax exemption is "only" $1,000,000 per spouse.</blockquote>


No it's not. Spouses have an unlimited exclusion (Except when you are dealing with non-US spouses which opens a big can of worms I won't get into) You can gift the million to whom ever you like).
 
[quote author="Mcdonna1980" date=1250926024][quote author="Minimorty" date=1250909689][quote author="mprince" date=1250908755]If you look at the link IrvineRealtor posted to the IRS it appears your wouldn't have to pay any taxes on the money gifted to a child. No matter what the amount is.</blockquote>






Even to your child, the lifetime gift tax exemption is "only" $1,000,000 per spouse.</blockquote>


No it's not. Spouses have an unlimited exclusion (Except when you are dealing with non-US spouses which opens a big can of worms I won't get into) You can gift the million to whom ever you like).</blockquote>




Spouses have an unlimited exclusion to <em></em>each other<em></em> but not to their children.



We are in agreement that you can gift the $1,000,000 to whoever you want.
 
[quote author="mprince" date=1250924390]Minimorty, can you show me on the IRS website where it states that?</blockquote>




Exclusions



The annual exclusion for gifts is $11,000 (2004 - 2005), $12,000 (2006 - 2008), $13,000 (effective January 1, 2009 per IR 2008 -117).

The applicable exclusion amount is increased to $3,500,000 for estates effective for decedents dying on or after January 1, 2009 and remains at $1,000,000 for gifts.





<a href="http://www.irs.gov/businesses/small/article/0,,id=164878,00.html">http://www.irs.gov/businesses/small/article/0,,id=164878,00.html</a>
 
Prince welcome, I really hope you are able to buy a house and join our little housing community. I assume you are looking in Irvine? There are a lot of resources here in researching and buying, I hope you ask more questions. This subject of parental gifting for housing is particularly interesting to me. I am no means condoning receiving money from your in-laws; as a matter of fact I consider it fortunate that you have such help towards something so expensive.



If it is not too personal, there are certain aspects of the transaction that I like to inquire. How do you feel about accepting the gift? Do you think there are certain ?strings? attached to the gift? How long have you been married? How well do you get along with your in-laws? Would you consider them relationally ?healthy? people, where they openly discuss family dynamics, issues and resolve impasses rationally and respectfully? Are you and your wife in complete agreement in accepting the gift? Do your in-laws express certain strong opinions, say, regarding child-rearing, career that they try to manipulate and control through guilt, shame or dissension? Do you in-laws know and respect clear emotional and physical boundaries?



Again, we really welcome your particular scenario? I have heard of certain problems arise within the marriage resulting from accepting in-law help. If nothing else, I hope I have given you something more to consider. Good luck?
 
[quote author="Minimorty" date=1250926969][quote author="Mcdonna1980" date=1250926024][quote author="Minimorty" date=1250909689][quote author="mprince" date=1250908755]If you look at the link IrvineRealtor posted to the IRS it appears your wouldn't have to pay any taxes on the money gifted to a child. No matter what the amount is.</blockquote>






Even to your child, the lifetime gift tax exemption is "only" $1,000,000 per spouse.</blockquote>


No it's not. Spouses have an unlimited exclusion (Except when you are dealing with non-US spouses which opens a big can of worms I won't get into) You can gift the million to whom ever you like).</blockquote>




Spouses have an unlimited exclusion to <em></em>each other<em></em> but not to their children.



We are in agreement that you can gift the $1,000,000 to whoever you want.</blockquote>


I misunderstood whay your were writing the first time. I see what you are saying. Each parent can give their child a million dollars if they have not used any of their exclusion.
 
[quote author="qwerty" date=1250908917][quote author="awgee" date=1250888363][quote author="qwerty" date=1250857807][quote author="awgee" date=1250855790]McDonna's answer is close enough.</blockquote>


To get around the gift being taxed can the parents loan the money to the daughter/husband and then gift them 52K/year in the form of debt forgiveness? Or would that be considered debt forgiveness income, if it is debt forgiveness income then couldnt the parents just gift them 52K/year and the daughter/husband just use that to pay back the parents? Seems like this could be a workaround, but im not a tax pro like awgee.



What about having the parents buy the home with the daughter/husband then having the parents quit claim the deed to the kids? This seems like it would be taxable.</blockquote>


Quitclaiming is a gift and gift tax code applies.

What do you need a work around for? The $1,000,000 exemption aint enough?</blockquote>


One million is probably enough, i was just curious if the work around would work, thats all.</blockquote>


Google imputed interest and acceptable federal rates.
 
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