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DarkOut, in a great reply to KBecks, added:

<<Hmmm...isn't the tax-free gift limit $10,000? Or is that $8,500 to each of you? Is that legal if you file jointly? No one's ever given me that kind of money before (poor me) so I'm not sure what the rules are here.>>

The $10K gift limit is per person. So if mom gifted $10K to her daughter and $7K to her SIL (or any other combination to the two that totalled $17K), then the mother is in great shape and has followed the law correctly. It's always the giver, not the recipient, that has to worry. Thus, how KBecks files her return has no impact on the gift. Further, the mother could have given all $17K to KBeck without a problem if the mother's husband joined in that gift. In that scenario $10K would come from mother and the other $7K from the father, which is also perfectly legal. The parental couple in that instance would also owe no gift tax.

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