The tax rate on income depends on what type it is. In your case, it is for the sale of his business. The amount paid by the buyer for each type of business asset is supposed to be reported to the IRS on Form 8594. If this income is classified as from the value of the "Goodwill" of the company, it is subject to ordinary income tax rates.
You cannot call this a Gift unless the giver signs a document to the effect and files a Gift tax return. The buyer of this business will not want to do this since he then cannot deduct this cost from his taxes.
If you arrange to collect the funds in installments over several years, then your tax rate may be lower. The risk in doing this is that we do not yet know what tax rates will be for the coming years. This year the top rate is 35%.
Hope this is helpful to you. Please click Reply if I can help you further.
If the buyer files the Form 8594, what type of taxes would we pay??
If this is a gift, could $13,000 be given to each in the family or is it just $13,000 total for the year
I have re-read your original question. At that time, I assumed that your husband sold a business. Did he actually own any of the business? Or stock in the business? Is this income really deferred compensation?
To figure out if this income can be classified as capital gain income, I will need to have you describe this income in more detail.
If some of the money is a gift, the giver can give each person $13,000 without having to file a gift tax return. If the giver is married, he and his spouse can jointly give $26,000 to each person.
Sorry for the confusion,
Actually, it would be better if you could classify this as capital gain income. The maximum tax rate for capital gains this year is 15%. Ordinary rates are as much as 35%.
For this to be a capital gain to you, it needs to be considered a sale of an investment. It would be helpful to know how the owner/Troy is accounting for his payment to you. If this income is deferred compensation, you will have to pay ordinary tax rates. Will Troy be giving you a tax reporting form of some kind? If you can find out, it will be helpful.
My apologies. I thought I was waiting for more information from you.
There is really nothing you can do on your end to influence what type of income this is. You will need to find out from the payer (or his accountant) how he is accounting for this payment. Is he going to issue you a 1099 or some other tax form?
That would be the form filed in the year of sale by both the buyer and seller of a business that allocates the purchase/sale price to each type of asset in the company. If your husband did not have any official ownership in the company, this form will not apply to him,
Sorry, I didn't see that one.
No, a gift received is not taxable to the recipient. Any gift tax requirements are on the giver. As long as the amount is not more than $26,000 per person per year, there is no reporting requirement for the giver and his wife.
I will have to check on that. I don't think there is a time limit.
Your deposit is still in your JA account. The answer is not actually paid for until you Accept.
I'll email customer service and let you know if there is any time limit and get back to you.
The there is a 24 hour time limit before your question "closes". You can later reacivate it by hitting the "re-list" button.
You are right about the credit card charge on your account. However, this answer isn't actually paid for unitl you hit the accept button. This means you can us your $34 for a different question if you don't accept this answer.