Tax question

S

Santi19

Guest
Jurisdiction
Oregon
My parents saved $50000 cash and it not in a bank. If loaned me this at the IRS minimum rate, would they have to file it on their taxes next year?
 
Santi19 said:
My parents saved $50000 cash and it not in a bank. If loaned me this at the IRS minimum rate, would they have to file it on their taxes next year?
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I don't usually offer tax advice.
I am imminently qualified to do so, because I have educated myself about our tax laws for my benefit.
I also hold a JD, and have taken several IRS courses for those who defend cases in their tax court, and at the federal level.
I did that when I had an association with Deloitte & Touche, one of the preeminent tax firms (among other feats of acclaim) on the planet.

But, I'll break my self imposed rule of silence in your case.
If your parents TRUST you, and you are a person of his/her word, they can GIFT more than HALF of that amount.
If you have children, you can possibly be gifted the entire amount sought of $50,000.

While technically the IRS considers any gift a taxable gift, currently an individual can give up to $14,000 a year to anyone—and any number of people—without incurring gift taxes, or even having to report the gift.

Married couples (your wonderful parents) who elect to split their gifts for the calendar year can give up to $28,000 a year to each issue of their marriage, or anyone for that matter. This means your parents could combine their annual limit and give each of their children or grandchildren up to $28,000 for the 2016 tax season — and none of you would have to pay taxes or even report the gift. However, if your parents decide to do this for one gift, they must split all other gifts during that year. And, although there would be no gift tax due, they would each have to file a gift tax return (IRS Form 709).

You, of course, could CHOOSE (and should) repay the entire GIFT, or GIFT it back to yoru parents, mate.

This is what I've done for my children, grandchildren, and (thank God) my great-grandchildren, too, for years; and will continue to do so until I die.
 
army judge said:
I don't usually offer tax advice.
I am imminently qualified to do so, because I have educated myself about our tax laws for my benefit.
I also hold a JD, and have taken several IRS courses for those who defend cases in their tax court, and at the federal level.
I did that when I had an association with Deloitte & Touche, one of the preeminent tax firms (among other feats of acclaim) on the planet.

But, I'll break my self imposed rule of silence in your case.
If your parents TRUST you, and you are a person of his/her word, they can GIFT more than HALF of that amount.
If you have children, you can possibly be gifted the entire amount sought of $50,000.

While technically the IRS considers any gift a taxable gift, currently an individual can give up to $14,000 a year to anyone—and any number of people—without incurring gift taxes, or even having to report the gift.

Married couples (your wonderful parents) who elect to split their gifts for the calendar year can give up to $28,000 a year to each issue of their marriage, or anyone for that matter. This means your parents could combine their annual limit and give each of their children or grandchildren up to $28,000 for the 2016 tax season — and none of you would have to pay taxes or even report the gift. However, if your parents decide to do this for one gift, they must split all other gifts during that year. And, although there would be no gift tax due, they would each have to file a gift tax return (IRS Form 709).

You, of course, could CHOOSE (and should) repay the entire GIFT, or GIFT it back to yoru parents, mate.

This is what I've done for my children, grandchildren, and (thank God) my great-grandchildren, too, for years; and will continue to do so until I die.
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Thanks you so much for that info. So theoretically, my parents could give my wife and I up to 58,000 without having to report it as a gift?
 
Santi19 said:
Thanks you so much for that info. So theoretically, my parents could give my wife and I up to 58,000 without having to report it as a gift?
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No, not in theory, in actuality.
Its the law, mate.
If they decide to do it, GIFT you and your spouse, each of you could receive up to $56,000.
You could receive $28,000, as could your spouse.
Your wonderful parents have to complete and file a gift tax return (IRS Form 709).
Yes, the GIFT must be reported, but no one would be taxed for transferring the funds.
Read my post carefully, as no job is completed until ALL of the paperwork has been completed and filed CORRECTLY!!!
You, of course will simply repay the money to them without interest.
That is, of course, if your parents agree to gifting your family.
I wouldn't seek interest from you, but it would certainly be the right thing for you to do, repay them with interest.
No one would need to know that, however.
You would not need to declare their generosity as income, either.
 
army judge said:
No, not in theory, in actuality.
Its the law, mate.
If they decide to do it, GIFT you and your spouse, each of you could receive up to $56,000.
You could receive $28,000, as could your spouse.
Your wonderful parents have to complete and file a gift tax return (IRS Form 709).
Yes, the GIFT must be reported, but no one would be taxed for transferring the funds.
Read my post carefully, as no job is completed until ALL of the paperwork has been completed and filed CORRECTLY!!!
You, of course will simply repay the money to them without interest.
That is, of course, if your parents agree to gifting your family.
I wouldn't seek interest from you, but it would certainly be the right thing for you to do, repay them with interest.
No one would need to know that, however.
You would not need to declare their generosity as income, either.
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You are great! Thank you. I am going to use the money to open a small business, and would like them to have 5% of my profits for the rest of their lives. Tax wise, would it be better to receive the money as an investment? Would they have file at this if i received the money this way?
 
The $14,000 per person limit is the limit without filing any gift tax return. However, they can give you as much money above that as they want but will have to file a gift tax return which is no big deal unless they exceed the lifetime gift tax exclusion with is currently over $5,000,000.

Check out the IRS website regarding gifts:

Gift Tax

Santi19 said:
Tax wise, would it be better to receive the money as an investment? Would they have file at this if i received the money this way?
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Nothing is better than giving you the gift and neither of you have any tax liability for it.

Then you can use the money however you want to use it. If your business becomes successful you can gift them money as you choose, also without any tax liability unless you give them over the life time gift exclusion.

Gift is simple. Business investment and return is complicated. Keep it simple.

Oh, if they loan you the money and you pay interest, they would have to declare that interest as income and pay tax on it. If the loan was to your business name, not your name, you can deduct the interest paid as a business expense.

The IRS website also has a lot of good stuff about business taxes.
 

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