Exclusion of gift and estate tax is $5,250,000 for 2013, so it my be most efficient simply to do a gift tax form for 608,326 (500,000 @4% for 5 years compounded annually). THis would exclude any income for the son, and retain 4.6 mil estate exemption for Taxpayer
Taxpayer would simply file a form 709, gift tax form
Aldo, as a product of TRA (fiscal cliff deal) exemption amount will continue to index (made permanent)
Why is there no interest income to the taxpayer? Didn't he receive the interest and gift it back to the son?
I was going to mention that. IRS would say that this was a below market loan and that there should have been imputed income in the amount of at leasr AFR (Applicable Federal Rate) to the Creditor
However, you can capitalize that interest
That's what you'd be ding by gifting the total amount
cleans it up
How do you capitalize the interest?
A loan instrument on hand that says that interest not paid would be capitalized (added to the loan)
That's why I compounded the number
ok. Got it. Thanks.