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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 15831
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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What do I need to do to give $28,000 for my son and his wife

Customer Question

What do I need to do to give $28,000 for my son and his wife for tax year 2017?
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: They need money for a down payment on a house. This money will come from and IRA cash reserve account. What are the tax implications? Do I have to pay tax on the distribution to them or do they need to pay taxes as income on he $28,000?
JA: Is there anything else the Accountant should be aware of?
Customer: This will be from a contributory IRA. When I take distributions for myself, I have tax withheld. I need to know whether I need to withhold tax from the distribution.
Submitted: 7 months ago.
Category: Tax
Expert:  Lane replied 7 months ago.

Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

Expert:  Lane replied 7 months ago.

There is no income tax to them. If you are giving this too then without the expectation of anything in return, it's a gift. And IRC section 102 specifically exempts gifts and inheritance rom income tax.

...

There COULD be a gift tax (a transfer tax paid by the giver) but it appears that you understand that there is a 15,000 annual exclusion (was 14,000 in 2017 but that time has passed - as cash basis calendar year taxpayers this will be a 2018 transaction) so that you can NOW give 30,000 to them (15,000 each) and there will be no gift tax OR gift tax forms required.

...

In terms of taxation to you, any money that is pulled from the IRA will be taxed as additional ordinary income ... so the AMOUNT of that tax will depend on your OTHER taxable income for 2018.

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And if the cas reserve is, say, an interest bearing individual oor joint account, there would Be no taxable event there.

Expert:  Lane replied 7 months ago.

If you'd like to tell me what your other income for the year will be, I can run the numbers to see how much the tax would be on the IRA distribution (would also need to know how much OF the money will come from the IRA).