My father in law
is a farmer in Nebraska. He “gave” his combine to his son in law who farms most of his land for him. He told the son in law that instead of paying him for the combine, divide the amount evenly to the other three siblings. So my wife and I both received a check for $20,000 each.
When I spoke to my father in law he informed that I needed to claim to funds as unearned income
on my taxes
for 2012, and to let my accountant know that the funds came from the sale of farm equipment. After speaking to my accountant she informed me that I don’t pay the taxes on the money. She asked to to contact my brother in law and ask him if he is sending me a 1099. I contacted my brother in law and asked him if he was sending me a 1099 and if so how was he going to code it (which to my understanding he could have only coded it as unearned income). He informed me that he was going to discuss this with his accountant and call me back. When he called me back he informed me that his accountant told him that I was not going to receive a 1099 for the funds. His accountant informed him that the transaction
was to be treated as if the siblings sold the combine to him. The only question I have with that analogy is that we never owned the combine.
I’m in a difficult situation here as I don’t want to cause any problems, but I also don’t want to be responsible for the taxes if I’m not liable for them. My wife does not work and we file separately, so if we are responsible for the taxes, are we individually responsible for the $20,000 we received? If this is deemed a “gift” are we only responsible for the difference between the annual allotted gift amounts? For example my father in law or brother in law can gift us
up $12,000 a year from my understanding. So would my wife and I be responsible for $8,000 individually?
Thanks for your assistance, and I will be happy to provide more information if needed