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<Steve3K writes:

My mother-in-law wants to "give" money to my wife and her brother to remove capital from her estate in anticipation of nursery home sell-off requirements or death in the future.

Some questions if I may...

1. Can she AND my father in law gove $10,000/year to wife and brother?
2. Is this $10K free from income taxes for the "children"?
3. If in the future, she has monetary needs, and they give her some money (back), what is the effect?
4. Can they also gift teh childrens' spouses? What limits?

I reply:

The general rule is that any person may give $10,000 per year to any other person without gift and estate tax consequences. The recipient of a bona fide gift never owes taxes on receipt of the gift, although the recipient might owe capital gains taxes (based on the donor's tax basis and holding period) upon sale of a gift other than money. I read your question as discussing a gift of cash, though, so these concerns are not implicated.

Thus, the answers to questions 1, 2, and 4 above are yes, yes, and yes (up to $10,000 per year). As to question 3, as long as the return is truly voluntary, I imagine that there are no tax consequences up to $10,000 per year. However, I believe there are non-tax regulations regarding give-aways in anticipation of nursing home requirements, especially if the nursing home is federally funded. --Bob
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