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Why the giver and not the receiver?

 
 
Reply Mon 5 Nov, 2007 10:50 am
We are planning to give a relative a monetary gift of $10,000. I was looking around on the Net to try to learn about possible federal income tax implications. Much to my astonishment and surprise, it seems that the giver money (me) might have to pay a gift tax. The giver? Could this be true? It defies logic and common sense. If anyone had to pay taxes on a gift, why would it not be the receiver of the money and not the giver? I would be the giver in this case and would not be receiving money. I would think the recipient of the money, if anyone, would have to claim the money received as income and not me the giver.

Could someone explain the reasoning why the giver and not the receiver would be liable for gift tax?


Thanks to everyone in advance. Surprised Confused
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Type: Discussion • Score: 1 • Views: 1,324 • Replies: 9
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dadpad
 
  1  
Reply Mon 5 Nov, 2007 10:52 am
Cause thems the rules.
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JPB
 
  1  
Reply Mon 5 Nov, 2007 11:40 am
I think you can give up to $10,000 per year to any individual without paying a gift tax. Oftentimes people will try to shelter personal assets from being taxed by shifting (gifting) those assets to someone else in a lower tax bracket, a family member perhaps. The intent is not to try to prevent you from giving gifts, it's to prevent you from trying to dodge your own tax liability. I'm not saying that's what you're trying to do, but it's the general rationale.
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Mame
 
  1  
Reply Mon 5 Nov, 2007 12:01 pm
Why not just write them a cheque and not declare it as a gift? For all the govt knows, you might be repaying a loan, or advancing them one. It's none of the govt's business if you want to give someone some money.

Bunch of nosy bastids.
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JPB
 
  1  
Reply Mon 5 Nov, 2007 12:12 pm
It's up to $12,000 per year.

Quote:
There are two levels of exemption from the gift tax. First, transfers of up to (as of 2006) $12,000 per person per year are not subject to the tax. An individual can make gifts up to this amount to as many people as they wish each year. A married couple can pool their individual gift exemptions to make gifts worth up to $24,000 per person per year without incurring any gift tax. Second, there is a credit that essentially negates the tax on gifts until a total of $1,000,000 has been given by one person to another.

If an individual or couple makes gifts of more than the limit, gift tax is incurred. The individual or couple has the option of paying the gift taxes that year, or to use some of the "unified credit" that would otherwise reduce the estate tax. In some situations it may be advisable to pay the tax in advance to reduce the size of the estate.

In many instances, however, an estate planning strategy is to give the maximum amount possible to as many people as possible to reduce the size of the estate. Source


Unfortunately, the IRS makes it its business to know.
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Mame
 
  1  
Reply Mon 5 Nov, 2007 12:15 pm
How would they know if you didn't tell them? What if you were repaying a debt?
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JPB
 
  1  
Reply Mon 5 Nov, 2007 12:19 pm
Unless the funds are cash stuffed in mattresses all financial transactions are reported to the IRS by the financial institution making the transaction. Moving large sums of money would have to be reported and the reporting could trigger an audit.
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Mame
 
  1  
Reply Mon 5 Nov, 2007 12:29 pm
Ah... wow. Big Brother! That's not the way up here.
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JPB
 
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Reply Mon 5 Nov, 2007 12:41 pm
Yeah, the Big Brother stuff gets to me too.


easyasabc, it looks like you can give your relative the $10,000 gift as planned and not trigger a taxable event to either of you.
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roger
 
  1  
Reply Mon 5 Nov, 2007 01:26 pm
Like dadpad, I don't even attempt to explain the reasons for law, especially tax law. Them's the rules.
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