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I have oil royalty income from 5 oil wells in LA. I live in…

I have oil royalty...

I have oil royalty income from 5 oil wells in LA. I live in WA state. I want to divide the income amongst 5 of my grown children/grandchildren soon. The oil company says that I should/could do this with QuitClaim deeds. I have 2 questions : does the IRS permit this, and what are the income tax implications, if any ? Thyou

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

Other than this oil royalty income, my personal tax situation is simple.

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Answered in 10 minutes by:
3/14/2018
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,986
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Yes, IRS has nothing to do with your deciding to gift your children an interest so that they would receive that commensurate amount of royalty.

...

And taxation follows ownership. Once they pwn an interest, they will be responsible for the tax on that income.

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The only POSSIBLE implication of the gift (transfer of ownership for nothing in return is a gift under the tax code) is a gift tax ( a transfer tax paid by the giver)

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However the new tax law just raised the $5,490,000 lifetime gift /estate tax exemption to $11 million+. So there is likely no tax (depending on the value of what's being given).

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If the value of what you are giving is over 15,000 to any individual (you can gift 15,000 to as many people as you would like per year and your under the gift tax exclusion), you'll need to file a gift tax form ... which is just informational, to track AGAINST that 11 million lifetime exemption (over 20 million if you are married)

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Customer reply replied 1 month ago
Excellent reply, short, clear and right to the point. Thank you kindly.

You’re very welcome... Your positive rating … (by using those the stars on your screen, and then clicking “submit”) …is thanks enough.

Otherwise I receive no compensation for the work here.

...

Thank you!

Lane

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,986
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,986
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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