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its after midnight on 12/31. Can my kids still deposit the

it's after midnight on 12/31...
it's after midnight on 12/31. Can my kids still deposit the gift checks given to them (and written) on 12/31 and still have it apply for 2012 gift tax exclusion?

or...do i try to open one online in hawaii?
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Answered in 1 hour by:
1/1/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,160
Experience: Taxes, Immigration, Labor Relations
Verified

LEV : Hi and welcome to Just Answer!The IRS uses so-called "constructive receipt rule". When an amount is credited to the account or made available to you without restriction - it is considered as paid. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. In your situation - if checks are given to your children on 12/31/2012 - it is considered as paid in 2012 if checks MIGHT be deposited on 12/31/2012. However if given after banks are closed - it will be considered as paid on the next business day.In case of an audit - because that is a transaction between related parties - the fact of not depositing the check in 2012 could be a huge difference. The gift is considered as occurred if both are true (1) the donor made a gift and (2) the donee accepted the gift. The fact of not depositing the check in 2012 could be interpreted as the gift was not accepted in 2012 - and as such the gift transaction would not be treated as occurred in 2012.So based on your information - neither the donor made a gift nor the donee accepted the gift in 2012. In your situation - the transaction will be recorded in 20113 - and the gift will be considered as made in 2013.
Customer:

Hi Lev, so here's the situation, the checks were cut around noon, perhaps earlier, and given to the kids in plenty of time to deposit the checks, with the younger one giving hers to the 18 year old to deposit into each's respective account. Since the ATMs' are 24 hours, they decided that as long as they get it deposited and receipted by then, they'd be fine. The 18 year old, however had recently (documented) had her purse stolen. The bank, via the ATM, posts deposits up until 8PM as deposits for that day. She depended on that. However, after spending from 4:30 onward on the phone five times and at least five different people (per our phone cel logs) she found out that she couldn't get around having both her ATM card and her license missing. Being new at how banks work -- and just being a kid (with ADHD), she realized that she better get over to her sister and have her sister make a deposit for both of them into her (sister's account).

Customer:

YIPES READ #3. My shift key seems to have posted each time.

Customer:

THIS IS THE CORRECT VERSION: Hi Lev, the children's grandmother wrote the check in the morning, and it was her belief based on prior and current conversations, that her son was going to give it to the kids right away, that they were expecting it, and that they were going to deposit it, all well before 5PM. That's where knowledge ended for the grandmother as everyone said thank you. After that, the 17 year old gave hers to the 18 year old to deposit into each's respective account. Since the ATMs' are 24 hours, they decided that as long as they get it deposited and receipted by then, they'd be fine and depended on that. The 18 year old, however had recently (and reported) had her purse stolen. Then after spending from 4:30 onward on the phone five times and at least five different people up until at 11PM (per our phone cel logs) she found out that she couldn't get around having both her ATM card and her license missing. She's new at how banks work -- just a college freshman (with ADHD). Anyway she realized that she better get over to her sister and have her sister make a deposit for both of them into her (sister's) account. Her sister has aspergers, so some arranging had to be done, as well as waiting at a check point where all cars are checked fro drunk drivers. Ultimately, they got to the atm and made the deposit at 12:40am. I do realize this is a long story, but if now, while fresh in everyone's minds, they put their phone logs, reported missing purse and the 12:40am receipt into a IRS tax file if they're ever audited, that pretty much does allow the IRS agent to treat it as if not related, right? Also, the 18 year old had seen her grandmother just that once in four months. Also, is the story mute and it being from an 85 year old grandmother who had seen the kids in a while enough of distance? It wasn't from the kids parents.

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Hi!
Assuming - you will treat the gift as made in 2012.
As you already noted - in case of the audit - there is a risk that the IRS agent could disagree with your and gift will be re-classified as made in 2013.
It is possible that after you explain all circumstances - and provide documentary evidence of your specific circumstances - you MIGHT convince the IRS agent - but still there is a risk that the IRS agent will disagree with your position.
In this case - your only option - to go to the Tax Court and defend your position. Most likely - you will need a tax attorney to represent you - means additional costs $2000 - $5000.
If I were a judge - I would consider your circumstances and ruled that the gift were made in 2012. However - we may not predict the possible court ruling.
So - we all agree - there is a risk - and that is up to you if you are willing to take the risk.
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,160
Experience: Taxes, Immigration, Labor Relations
Verified
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Lev
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