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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Experience:  Nearly 30 years of varied tax industry exp. Tax Biz owner
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Grandfather is US citizen and had a mutual agreement with his

Customer Question

Grandfather is US citizen and had a mutual agreement with his wife on his funds 20 years back. Now he wants to distribute his money to kids and grandchildren (non US citizen) before he dies. How is this possible without paying tax? He never gave us any money before.
Submitted: 11 months ago.
Category: Tax
Expert:  Tax.appeal.168 replied 11 months ago.
Welcome. THANK YOU for choosing Just Answer. My name is XXXXX XXXXX my goal is to help make YOUR life, a little...LESS taxing.

Q: How is this possible without paying tax?

A: This is possible due to the Unified Gift Tax Credit. Currently U.S. citizens are allowed to gift as follows;

Exclusions

  • The annual exclusion for gifts is $11,000 (2004-2005), $12,000 (2006-2008), $13,000 ( 2009-2012) and $14,000 (2013).
  • The applicable exclusion amount is increased to $5,000,000 for estates of decedents dying on or after December 31, 2009.
  • The applicable exclusion amount for gifts is $1,000,000 (2010), $5,000,000 (2011), $5,120,000 (2012) and $5,250,000 (2013).

As you can see these amounts have changed over the years.

 

REFERENCE SOURCE:

 

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/What%27s-New---Estate-and-Gift-Tax

 

-------------------------------

 

Ok, what does the above reference mean? What is means that currently, U.S. citizens are allowed to gift up to $14,000 annually to any one individual without creating a taxable event (without any forms having to submitted to the IRS). Gift amounts that exceed the $14,000 will require the donor to complete a Form 709,which is a gift tax return (informational purposes only--no tax due by the donor). Currently there is a lifetime gift exclusion of $5,250,000 for U.S. persons, which means that they can gift away this amount in their lifetime and not have to pay tax on it. For more detailed information, you can refer to the IRS Pub 950, which should shed a bit more light on this matter for you.

 

Link to Pub 950:

 

http://www.irs.gov/pub/irs-pdf/p950.pdf

 

Please let me know if I can be of further assistance to you regarding this matter.

 

Thank you again for using JUST ANSWER.

 

 

Customer: replied 11 months ago.

Thank you Angela. So basically my grandfather can give away up to $5,250,000 and spread it to his children and grandchildren even now. Just the only thing he needs to do is to file the form 709? He will not pay any tax on it? Where do I find the form 709?


 


Thank you in advance.

Expert:  Tax.appeal.168 replied 11 months ago.
Hello again,

You are welcome. Yes, your understanding is correct. The link and instructions to the Form 709 are listed below:

http://www.irs.gov/pub/irs-pdf/f709.pdf
http://www.irs.gov/pub/irs-pdf/i709.pdf

--------------------------------------

Note that the above form/instructions are for TY 2012. the 2013 forms have not been released yet. Typically IRS forms are released toward the end of the year or in January of the following year. In some cases later than that.
Customer: replied 11 months ago.

Thank you. So in case he give us the money now. He can file the form when available, correct? What happens in the worst case, he dies before this form gets available. Do I need to do anything?

Thanks!

Expert:  Tax.appeal.168 replied 11 months ago.
The Form 709 is an anuual form that should be filed between January 1, and April 15th. If your grandfather gifts money now and passes away prior to the the dates mentioned, the estate will complete the proper forms as part of the estate tax return. Unless you are the executor of the estate, if he passes away, there is nothing that you need to personally do.
Customer: replied 11 months ago.

Thank you. So if this is happening we need to pay tax on it? How do I make sure that the estate tax return is filled out properly and how do I know by whom this is done? Sorry I do not live in the US!

Expert:  Tax.appeal.168 replied 11 months ago.
Are you a U.s. citizen or austrian citizen? If you are a U.S. citizen, receivers of the gift does not have to pay tax on the gift. I don't know the tax laws of Austria, so I can't answer the question relating to whether or not tax will need to be paid from an Austrian tax standpoint. I suggest contacting a reputable tax person in Austria to find this out.

Q: How do I make sure that the estate tax return is filled out properly and how do I know by whom this is done?

A: If you are not the executor or the administrator of the estate, there is really no need for you to concern yourself with the estate tax return. The executor or administrator is the person who will be responsible for having the estate tax return completed. More than likely, the return will be completed by a professional tax person. You may or may not be privy (be entitled to have access) to that information. As mentioned previously, the Publication 950 explains in greater detail how matters like this work.
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 2502
Experience: Nearly 30 years of varied tax industry exp. Tax Biz owner
Tax.appeal.168 and 4 other Tax Specialists are ready to help you
Customer: replied 11 months ago.

Thank you Angela for this valuable information.

Expert:  Tax.appeal.168 replied 11 months ago.
You are very welcome. Thank you for the high positive rating. Though you may be prompted to do so, there is no need to respond to this post.

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