This question relates to gift tax
/GST/and potential loan arrangements between a mother and a daughter.
The hypothetical circumstance is described below:
- a mother gives $700,000 to a daughter in 2016. She has not previously given this kind of money in the prior periods.
- the mother is a green-card holder residing in the U.S and the daughter is a US
citizen residing in the U.S. She obtained her citizenship in 2016 (previously she was a green card holder).
1) Scenario 1: the intention of the mother is to give the money to the daughter without receiving anything in return
- Would this transaction
be subject to gift tax/GST?
- If so, does the mother and/or daughter have to pay any tax
in 2016 or in any future periods in regards ***** ***** transaction above?
- Is there any obligation for the mother and/or daughter to file and report the transaction above to any federal government
and local state
2) Scenario 2: the intention of the mother is to loan the money to the daughter, and the mother and the daughter have entered into a loan agreement which was signed and the mother is to receive interest
comparable or slightly more advantageous than the market rate
- is it possible for the mother and the daughter to enter into a loan agreement that is legally binding and enforceable?
- would the transaction be deemed as a "loan" and be no longer considered subject to gift taxes/GST?
- If the mother receives interest income
of approximately $500, and she does not have any other income
, would she be required to file federal income
tax for 2016 or in the future periods?