Hello and thanks you for using Just Answer. Gift tax is imposed on the person transferring property rather than on the recipients. Every taxpayer is allowed exclusions from gift tax before the tax is imposed. The gift tax exclusion is $1 million. A gift tax return (Form 709) must be filed if a taxpayer makes any taxable gifts in the calendar year. Taxable gifts are generally amounts over $13,000 (for 2011) given to someone other than a spouse or charity. Although tax is calculated on the return, no tax is due until the taxpayer exhausts the $1 million gift tax exclusion.
Did the benefactor give you a reason why you must give $1,062,000 back to him and $2,125,000 to a designated person of the benefactor?
The benefactor does not require this. This is part of the Gift Agreement. The benefator is simply the person who selected you to be a recipient of the $10,000,000 gift. To correct the amounts, etc.
I hit send before I intended -- i had not finished.
Will you be receiving the $10 millions without having to gift any of the funds? Do you know where the benefactor live?
Oops. Let me begin again. Let me re-state this: (1) I am to receive a financial gift of $10,000,000. (2) %15 taxes will be taken out and I will get a check for $8,500,000 made out to me and delivered to me by courier. (3) I am to deposit the check in my bank and transfer $6,375,000 (75%) to a designated organization -- leaving a balance in my bank of $2,125,000. (3) $1,062,500 (half of the $2,125,000) is to be transferred to my benefactor. (4) That leaves in my bank $1,062,500. My benefactor is the person who submitted my name as a receipient of $10,000,000. I just need to know the tax implications of this. What am I responsible for as far as taxes are concerned.
Your federal tax on the $8,500,000 will be zero. The person giving you the $8,500,000 is responsible for any federal gift tax due. Who is the "designated organization" and why do you have to give the benefactor $1,062,500? The benefactor should be able to deduct the $1,062,500 from the $10,000,000.
The 'designated organization' and the benefactor are two different 'persons'. The 'designated organization' is the entity bringing this opportunity to us -- it will use its funds to help the natural disaster victims. the check will be issued by the U.S. Treasury Department so the benefactor has no power to request this deduction. I have benefactored people for this opportunity, and I have no power to do it either. I have no problem with the dispersion. Just wanted to know the tax implications. Are there any Maryland tax implications?
Maryland does not have a gift tax.
When I give 75% of the after-tax $10M (i.e. $6,375,000) to the "designated organization" do I then become liable for taxing -- since it is over $1M --??? or does the gift tax paid by the original giftor cover that? Also, since the amount I give to the benefactor is over $1M is it treated the same as the $6,375,000 given to the "designated organization"?
You will be responsible for payment of the gift tax when you gift the "designated organization" $6,375,000. The gift tax will be $2,231,250 ($6,375,000 x .35). You will owe $21,875 in gift tax when you gift the benefactor $1,062,500 ($62,500 x .35).
For further clarification: if the "designated organization" receiving the $6,375,000 is a church, how much gift tax will I owe?
If the "designated organization" is a church or any nonprofit organization no gift tax is due on the contribution and you will be able to deduct the contribution on your federal tax return.