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Hi,
Is there a way for a mother to give one of her sons $30K in one year without paying gift tax? From my Googling I see that $14K is exempt. But she would have to pay gift tax on the remaining $16K, right? Or is there a legitimate way to avoid that? The tax code is so complicated with so many nuances that I thought I would ask here just in case.
Thanks,
RB
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But she would have to pay gift tax on the remaining $16K, right?

Right. That's the per person limit. She could give her son & wife and/or grandchildren $14K each. In essence she can give everyone she wants $14K without incurring a gift tax but any amount over that to any individual I believe would incur the gift tax.
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Is there a way for a mother to give one of her sons $30K in one year without paying gift tax?

Above $14,000 from one person to one person a gift tax return would be required, but that doesn't necessarily mean that gift tax would be due. See the explanation of the unified credit in the 709 instructions.

I really recommend hiring advice when one gets into estate/gift tax territory.

Phil
Rule Your Retirement Home Fool
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Right. That's the per person limit. She could give her son & wife and/or grandchildren $14K each.
And if her husband is still alive, he can give $14K to the son (I'll call him Junior) as well (and $14K to the daughter-in-law and $14K to each grandchild)

Alternatively, there is the possibility to give Junior $14K this year, and give him another $14K on Jan 1st. (which may or may not be sufficient for what is needed.)

And there's the option to lend him $16K, make him sign a note on it, and make him make payments on it, and maybe forgive the debt in her will (or potentially partially forgive it in 2014 and 2015)
If he doesn't make payments on it, I think the IRS could potentially consider it a $30K gift - because that's what it looks like (At least if you told me the story I'd say "yeah, that's a $30K gift, they're just trying to avoid gift taxes .")

But probably the simplest way for someone who doesn't have a large net worth is to use the "unified credit" - which lets you give away in life up to $1.7M, although it counts against what you can give away when you die - see form 709 as has already been suggested.
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But probably the simplest way for someone who doesn't have a large net worth is to use the "unified credit" - which lets you give away in life up to $1.7M, although it counts against what you can give away when you die - see form 709 as has already been suggested.
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Where is the $1.7M coming from? The unified credit of $2,045,000 is the equivalent of a combined lifetime gift-estate exemption $5,250,000.

Other than that, I agree. Gifts over $14,000/yr to a done will require the filing of a gift tax return, but that's not such a big deal. You just use up some of the exempt amount.

Bill
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RB
If one gifts more than the annual gift exclusion amount to another individual, and the giftor has not given more than $5.25MM in their lifetime, then there is no gift tax due. However, the giftor must file a gift tax return for the amount exceeding the annual exclusion ($14,000 this year)(note: there is also a provision for making gifts that are not of current value, all of which constitutes gifts in excess of the annual exclusion, but I won't go into that here, as it does not apply)

What happens to the filed gift tax return (form 709) is the gift tax is calculated on the gifted amount and then subtracted from the lifetime estate tax credit, reducing the amount of the credit. Future year gifts subject to gift tax also have the gift tax calculated and subtracted from the remaining credit. If gifts continue to be made in future years that exceed the gift exclusion, the calculation of gift tax and deduction from the lifetime credit will continue until the credit reaches zero. From that point on, gift tax will be due in the year the gift exceeding the annual exclusion amount is made.

The vast majority of people (99%?) will not have estates large enough to be subject to estate tax at death, so giving a few $thousand once or twice in ones lifetime in excess of the annual exclusion and having to file a 709 will, for them, not create a tax...only paperwork.

BruceM
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Thanks a lot Bruce. That helps. So she can give as much as she wants without worrying about taxes since she would NEVER be able to give more than 5 million bucks lifetime. Just the form if she goes over $14K for any year she does so.
Thanks so much.
RB
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don't forget to consider whether there is a state gift tax, and if so, whether the exclusions are the same as for federal gift tax. I recently read something about Minnesota enacting a new gift tax, which has (or when effective will have) a less generous lifetime exclusion than the federal unified credit. Connecticut used to have one also (maybe still does).
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