My husband and I will be the receivers of a gift from a friend. He will be giving us $25,000. How is the best way to handle this situation for all parties? He will either cash out some stock or sign the stock over to us.In addition we have a 14 year old son. Would it be better for some of the money to be given to him instead of one of us?If the donor gives each my husband and I $10,000, does this qualify for the gift tax exemption? Will my husband and I need to file taxes separtely to avoid taxes?Finally, we are willing to break up this gift over 2 years to maximize or minimize the benefits if this will reduce taxes.Any help will be greatly appreciated.
An individual can give $10,000 per year to as many individuals as he/she wants without incurring any tax consequences for either donor or recipient. No party would need to report the transaction on any tax forms. Therefore, he should give you and your husband each $10,000 separately and $5,000 to your son.If he gives more than $10,000 to any one of you, he needs to file a Form 709 (Gift Tax and Generation-Skipping Tax Form). He won't owe any gift tax at this time, but the amount of the gift over $10,000 will use up part of his lifetime unified estate tax credit. Depending upon his net worth at the time of his death, this may or may not make any difference as to whether his estate owes estate tax.Angelbuggy, E.A.
<< My husband and I will be the receivers of a gift from a friend. He will be giving us $25,000. How is the best way to handle this situation for all parties? >>The gift tax aspect has already been covered. I'll just emphasize that gift tax is the responsibility of the donor, not the recipient.Noncharitable gifts are not deductible for the donor. Gifts are never taxable income to the recipient.If the friend gives you stock, you also receive his basis and holding period. It's tacky, but make sure you get that information from him. You'll need it down the road, unless you hold the stock until you die.TMF ExROPhil Marti
<< My husband and I will be the receivers of a gift from a friend. He will be giving us $25,000. How is the best way to handle this situation for all parties? >>You've already received two excellent responses. If you would like to read more about gift tax issues, check out my various articles in the Taxes FAQ area. In addition, if you are interested in "income shifting" and having your friend contribute stock to one of your minor children, I have an article on that issue also. And, if you decide to go this route, make sure to check out the articles on the Kiddie Tax.TMF TaxesRoy
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