Pop Quiz - From what I understand, Sweep is married and has two kids. (Not picking on Sweep, just using him as an example.)
How much money can Sweep and Mrs. Sweep give to their two kids every year without triggering a gift tax liability? (Let’s assume that his kids are older than 18.)
I’m not an accountant and won’t even pretend that I have the slightest idea, but I’ll take a guess anyway.
56K?
The exclusion amount is 14K, but a separate exclusion is filed for each recipient, and each spouse can gift an amount up to the annual exclusion amount to the same person.
http://www.financialadvisorsoftexas.com/Gift-Tax.c1285.htm
Winner winner chicken dinner?
$10.9 million, but only one year.
^You’re both right, but not what I’m getting at.
Question - can Sweep give me $14k? And can Mrs. Sweep give me 14k?
^Yes
Yes and Yes, so can you then give that money to the kids?
^Exactly. Sweep give me $14k, so I write out two $7k checks to each kid.
Mrs. Sweep gives me $14k, so I write out two more checks for $7k to each kid.
Then Sweep writes Mrs. Greenman a $14k check and she writes $7k checks to each of his kids. Then Mrs. Sweep writes Mrs. Greenman a $14k check and…so on and so forth.
So here’s the question - how much can you give your kids each year? As much as you want–provided you have friends that will take five minutes to write a check for you.
This is all 100% legal. But you have to actually write the checks, write “2015 gift” at the bottom, and cash the checks. Make sure you dummy-proof it in case the IRS ever asks.
Yes, they can each give $14,000 to anyone they want every year before having to file a gift tax return.
What if you just give your adult children your credit card and have them buy everything that way, in amounts that far exceed $14k per year?
Trick question FAIL. We all know Sweep has no friends.
You would technically be guilty of tax fraud.
You’re losing me. Can you post a flow of funds picture?
I was pondering that, but didn’t feel like thumb-typing it out on my phone. After doing your gift allowance, you then gift to someone who agrees to gift it back to your kids. That would effectively have no upper limit, but presumably the risk of getting stiffed increases exponentially with each new “friend” enrolled. Presumably you can offer a kickback that is lower than your marginal tax rate and that makes it work more reliably.
Things that make greenman say hmmmmm
Ok, now I follow, temporary brain fart. Wouldn’t they be considered indirect gifts from you to your kids and therefore capped at the $14,000?
^No. That’s the beauty of it. Sweep can give anybody he wants $14k. And I can give anybody I want $14k.
Is it a “loophole”? Or a “tax advantage for the rich”? Absolutely. And 100% legal.
how about this: can you give your friend 14k and call it a debt. have said friend give your children the 14k. and then declare the 14k as an investment loss when it’s “not paid back”?
^ wouldn’t friend have to declare CODI?
Sure. You can always commit tax fraud.
What if my kid sets up a corp, issues a zero coupon 1000 yr maturity bond and I buy it?