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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My cousin wants to give us gift in the amount of 150,000 for

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My cousin wants to give us gift in the amount of 150,000 for a downpayment on a new house. My brother would like to thank him in the future with a gift of 150,000. Do we have to pay taxes on either of these transactions? I am reading that we would only be taxed if the amount is over 1 million in a lifetime. Also, because there are two gifts involved, would it be confused with repaying a loan?

A gift is defined as - a voluntary transfer of property from one person or entity to another made without charge or consideration. - http://www.lectlaw.com/def/g007.htm

 

Because your brother plan to pay that amount off - it is not a gift - but most likely a loan.

Because there is no any interest charged - the implied interest would be considered a gift - but the principal of $150,000 is not a gift but it is a loan.

 

As a recipient of a gift - you do not need to claim it as income. Regardless of the value of the gift. Please see for reference IRS publication 525 page 33 - http://www.irs.gov/pub/irs-pdf/p525.pdf

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The donor - might be required to file a gift tax returns if the gift amount is above $13,000 per person per year (for 2010).

There will not be any gift tax unless lifetime limit of $1,000,000 is reached.

 

Let me know if you need any help.

 

Customer: replied 7 years ago.

 

If it would be considered a loan, then what kind of taxes, if any, would have to be paid, and by which party. My cousin gives me a gift - no taxes for me, and my cousin may have to file, but no taxes for him, either on a 150,000 amount - correct?

 

Then my brother, who has nothing to do with my gift transaction, wants to give a gift to my cousin's wife - would it be treated as above?

If that is a loan - it is not a taxable income for you as a recipient and not a taxable income for a creditor when it is paid back.

You are correct -

-- the gift is not a taxable income for you as a recipient;

-- if your cousin never made any taxable gifts - because the gift value is above annual allowances - your cousin should file a gift tax return - but there would not be any gift tax due.

-- the gift your brother would made to your cousin's wife - would be treated the same way if it is not connected to your original transaction.

 

Let me know if you need any help.

 



Edited by LEV on 4/20/2010 at 9:21 PM EST
Customer: replied 7 years ago.

Okay, final scenarios . . .

 

My cousin gives me a gift in the amount of 150,000 and in a couple of weeks, I tell him I can't accept it. The bank will show 150,000 coming out, then 150,000 going back in. What are the tax issues then?

 

or

 

My cousin gives me a gift, but it is really a loan between my cousin and my brother (an advance on the sale of my brother's home. Again, 150,000 coming out, then back in, tax issues?

 

and finally,

 

If the last scenario, above, was to take place. Could we prepare a promissory note covering the gift/advance without tax issues?

 

 

If your cousin gives you a gift and you do not want to accept it - you simply do not deposit that amount into your bank.
You may borrow the money from your cousin and repay him back in a couple of weeks - there is no need to call that a "gift"

As the whole transaction looks as the money comes from your brother to you - that is a gift from your brother.
You actually plan to take a loan from your cousin and your brother will re-pay the loan for you - so that is considered as a payment to your.

You do not have to have any paperwork, but when you will pay a down payment on a new house - the mortgage company might ask you about a source of the money - and you might need a document.
For tax purposes - you do not need any documents - you might have them for your record if needed.

Let me know if you need any help.
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