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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15610
Experience:  15years with H & R Block. Divisional leader, Instructor
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I w/d money from my traditional ira to give to my daughter

Customer Question

I w/d money from my traditional ira to give to my daughter for a down payment on her first home do I still pay taxes and is there any break for making it a gift? What is the form 709 used for? Do I need to give her the money in year of distribution and the check from distribution was made out to me do I just deposit it and get a cashiers check made payable to her ?
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: No I just wasn't sure how to do this.
Submitted: 12 months ago.
Category: Tax
Expert:  Robin D. replied 12 months ago.

Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

Expert:  Robin D. replied 12 months ago.

A gift to an individual is not tax deductible even though you are required to report the gift if you give any one person more than $14000 (annual gift allowance).

The form 709 is used to report gifts when you go over the yearly amount but it is also used to claim the lifetime allowance so you do not pay any actual tax.

How you give your daughter the money does not have any relevance on your tax on the distribution or your reporting requirement for form 709. You can give her a check or cash even.

Your tax is going to be on the full distribution form your IRA. Then the gift is a separate tax event which is reported on form 709.

Please let me know if you need clarification. If you do not then a positive 5 star rating is appreciated so I get credit for the response. (look for the STARS or SMILEY FACES)

Expert:  Robin D. replied 12 months ago.

Did you need more information about reporting each event?

Customer: replied 12 months ago.
you are saying that I still pay taxes on distribution but I should file the form 709 to show a gift
Expert:  Robin D. replied 12 months ago.

That is correct.

The distribution is still reported as income by you and if the gift is more than the annual allowed amount ($14000) you must use form 709 to report it.

You will not pay tax on the gift as long as you have not already used up your lifetime limit ($5.45 million). You do have to report because the amount over $14000 reduces your lifetime amount and your estate has less when you pass away to claim for deductions on Estate tax.

Expert:  Robin D. replied 12 months ago.

Is that clearer? Let me know please