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Subject:  Re: Avoiding gift tax via a Corporation Date:  6/28/2006  5:06 PM
Author:  elZaphod Number:  87592 of 127753

Thanks for all the advice, folks. I hadn't thought of my wife receiving funds as well. I'm reminded of the scene from Shawshank Redemption when Andy advises the guard on a similar taxation question (while being held above an alley 4 stories below).

The $50K figure was just a guess, it could be more based on the value of the estate and how much they decide they want to give. If so, I might further investigate the corporation approach.

The only benefit in my mind is that rather than them having $50,000 sit in a bank account for five years as they draw it down, you would be able to invest it in your company, and possibly make their share of the company grow (which means it would take them longer to gift it to you). You would also need to borrow less, reducing you financing costs.

My intent was to try to find an all-cash discounted property at auction. If they 'invested', I would have access to all the capital right away, tax free. Not only would I need to finance less, I would have the added warm and fuzzy of having a much smaller loan-to-value ratio on the property. If some unforseen circumstance caused the deal to be unprofitable, or worse a partial loss, I could treat the private mortgage broker (my likely source of additional financing) as a senior creditor first. Probably a good idea seeing how they'd probably be a bit more adamant about being repaid than my parents. I was planning on rolling any potential profits into another future investment anyways, so there would be no rush for them to gift shares or cash to me personally right away.
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