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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4014
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi, I had a question. I was going through a lawsuit and I was

Resolved Question:

Hi, I had a question. I was going through a lawsuit and I was to be given 215,000 but I had to withdraw for some complicated reasons but the person that was on my side of the lawsuit will receive my portion of the money and she's just going to give me the 215,000$ once the money goes into her bank account. So what is the taxes or penalties I have to know about if there is any? Oh yeah I live In ohio if ya need to know that?
Submitted: 12 months ago.
Category: Tax
Expert:  Lane replied 12 months ago.

Lane :

Hi,

Lane :

If the settlement is truly going to the other person (she will get the 1099), and you are not a party to the lawsuit, then she will be responsible for any taxes due - and this will be determined on what sort of damages are paid

Lane :

If she simply give you $215,000 ( without the expectation of anything in exchange ) this will be a GIFT ... there is a $5,250,000 exemptions on gifts give (the giver of the gift pays this transfer tax), ... so she will have no taxes there (UNLESS she has already given over $5,000,000 in her lifetime)

Lane :

She WILL, however, have to file a gift tax form Form 709 - Internal Revenue Service to report the gift, so that it can be tracked against that lifetime exclusion

Lane :

And as far as any INCOME tax on the gift you will have none: Here's your tax code citation:

Lane :
(a) General rule.--Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.


26 U.S.C.A. § 102 (West)

Customer: So I will not had to pay any taxes or jump through any hoops upon receiving the money and in the future?
Lane :

None whatsoever ... only the GIVER has to file anything. Gifts are excluded from income And the GIVER of the gift only has to pay any gift transfer tax, once they've given over a certain amount for life ... the number will go up over time...If she died in 2012, the amount would have to be over $5,250,000 for there to be any tax againt her estate

Lane :

NOW, your only risk whatsoever would be if you povided some sort of service in exchange for this money.. THE the IRS would say that it is income .. but, again, if she is giving it without any expectation of anything in exchange from you, it is a gift and therefore not taxable to you at all

Lane :

You will, of course, have to pay tax on any dividends or interest on the money, once you have it invested or in the bank

Customer: Thanks for everything this helps allot.
Lane :

You're very welcome

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer: One more questions could you explain "You will, of course, have to pay tax on any dividends or interest on the money, once you have it invested or in the bank" if you could can you dumb it down for me please.
Lane :

Sure...

Customer: Thanks
Lane :

Because you said ..."So I will not had to pay any taxes or jump through any hoops upon receiving the money and in the future?" I was just pointing out that if you put this money in the bank, you get that 1099-int and have to pay tax on that,as you would with any other money. That's all ... Lets say that you put $200,000 in the bank this year and it earns 1% interest, you would make $2000 in interest and have to report THAT on your return for the next year

Customer: Ok I get it now thanks for everything lane this helped allot.
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4014
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you

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