Two $15,000 gifts to son

[1210sda]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

[Helo80]

Do it in cash.

[stan1]

Nope, under the exclusion limit. I'd do two checks for your records. One signed by husband and one signed by wife. No one will ever ask about it though unless your last name is Astor or the one that begins with a T.

[1210sda]

Nope, under the exclusion limit. I'd do two checks for your records. One signed by husband and one signed by wife. No one will ever ask about it though unless your last name is Astor or the one that begins with a T.

He has an account at Vanguard, so we just made two separate exchanges into his account. $15,000 each.

[stan1]

Do it in cash.

Why? A cash withdrawal and deposit of over $10K will get reported to IRS by the financial institution.

[stan1]

Nope, under the exclusion limit. I'd do two checks for your records. One signed by husband and one signed by wife. No one will ever ask about it though unless your last name is Astor or the one that begins with a T.

He has an account at Vanguard, so we just made two separate exchanges into his account. $15,000 each.

OK, not what I would have done from a record keeping perspective, but still no need to report anything further. You'll never hear about this again.

[MarkerFM]

Do it in cash.

Wut?

[Doctor Rhythm]

Do it in cash.

Wut?

You mean you don’t show up at your kids’ home on Thanksgiving with a sweet potato pie and an envelope full of Benjamins?

To OP, the the two check system works fine. Here is the IRS FAQ page on gift taxes and reporting: https://www.irs.gov/businesses/small-b ... gift-taxes

[bertilak]

We each donate $15K and do so as transfers in kind as they have investment accounts (at Vanguard). This way we do not incur taxes. We figure the kids will be in a lower bracket and they will not need to liquidate anyway, at least not all of it. We expect this to be a long-term investment on their behalf.

We actually had them open Vanguard accounts to facilitate this. People are willing to follow even bothersome instructions if the money is there!

[bertilak]

Do it in cash.

Wut?

You mean you don’t show up at your kids’ home on Thanksgiving with a sweet potato pie and an envelope full of Benjamins?

The effect is about the same even with a single Benjamin attached to a note saying "Check your Vanguard account."

[Misenplace]

For the record, discussions of dishonest behavior or bypassing the law are totally unacceptable.

The intent is to understand how to do this within the existing legal framework; in which case this discussion can continue.

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room.

The approach is to educate members on how to do things legally. State your points in a factual manner. If the intent strays from this objective, please report the post and we'll investigate.

[stan1]

For the record, discussions of dishonest behavior or bypassing the law are totally unacceptable.

The intent is to understand how to do this within the existing legal framework; in which case this discussion can continue.

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room.

The approach is to educate members on how to do things legally. State your points in a factual manner. If the intent strays from this objective, please report the post and we'll investigate.

Guessing some posts were deleted that didn't meet the standard? Surely no one is disputing the $15K annual exclusion or claiming its use is unethical?

[shess]

We each donate $15K and do so as transfers in kind as they have investment accounts (at Vanguard). This way we do not incur taxes. We figure the kids will be in a lower bracket and they will not need to liquidate anyway, at least not all of it. We expect this to be a long-term investment on their behalf.

Will they still be in a lower bracket after holding it for a long term?


We have some stock with very low basis we intend to give to charity or get the basis step-up at death because that gets rid of the gains entirely, rather than shuffling them to someone else.

[Soon2BXProgrammer]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

No, as long as each of you really individually gives $15k. (unless your in a community property state, then thigns are slightly different)

Lets assume you wrote a check. The source account, does it have both peoples names on it? And did each of you sign one of the checks?

My point is.. if you wrote two checks from an account that only has your name on it... and in the memo line wrote "from mom" and "from dad".... that isn't a gift from each of you.. (unless your in a community property state and then the rules are a bit more complex).

[bertilak]

We each donate $15K and do so as transfers in kind as they have investment accounts (at Vanguard). This way we do not incur taxes. We figure the kids will be in a lower bracket and they will not need to liquidate anyway, at least not all of it. We expect this to be a long-term investment on their behalf.

Will they still be in a lower bracket after holding it for a long term?

Who knows? If there's going to be a tax hit, it might as well be when the money is needed, not just as it's transferred from one place to another.

[TropikThunder]

Guessing some posts were deleted that didn't meet the standard? Surely no one is disputing the $15K annual exclusion or claiming its use is unethical?

One poster suggested making the gift in cash, with the assumption that one could then avoid recordkeeping requirements. That's not advisable, and in fact doesn't remove any recordkeeping requirement, it just shifts the potential fallout to the recipient when they deposit the cash, which is enough to trigger elevated banking scrutiny. It have been made in jest, who knows, but it's bad advice.

[HueyLD]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

I think the OP lives in a community property state. And there is an advantage being in a community state as the IRS says (in Form 709 instructions):

“ If a gift is of community property, it is considered made one-half by each spouse.”

In other words, the OP can write one $30k check from a community property account and the IRS automatically attributes $15k to each spouse. No spousal consent or tax filing is required!

[TomatoTomahto]

Our estate attorney suggested, and files for us, a gift tax form showing our combined $30k annual gift to each of the kids. We live in MA, which has a draconian $1M cliff tax on inheritances. We write the check from one account, but the form makes it clear that it is from both of us.

What’s the harm?

[fourwheelcycle]

This discussion seems trivial, so long as the donors are lawfully married to each other. If you do file 709 forms, the IRS does not ask how the money was transferred, it only says "Decide whether you and your spouse, if any, will elect to split gifts for the year." There are no questions regarding how the funds were actually transferred.

No one should ever be concerned about a gift of $30K or less from two spouses. If friends, or the IRS, do ask, the simple answer is "We decided to give the money as a split gift".

[fourwheelcycle]

Our estate attorney suggested, and files for us, a gift tax form showing our combined $30k annual gift to each of the kids.

This seems unlikely, unless I do not understand some nuance of the IRS requirements. If a gift from a married couple is not over $30K, no gift tax form is required. If the gift is over $30K, and the spouses want to split the gift in order to avoid or minimize future gift tax liability, they must file two separate gift tax forms.

[fourwheelcycle]

Duplicate - deleted.

[TomatoTomahto]

Our estate attorney suggested, and files for us, a gift tax form showing our combined $30k annual gift to each of the kids.

This seems unlikely, unless I do not understand some nuance of the IRS requirements. If a gift from a married couple is not over $30K, no gift tax form is required. If the gift is over $30K, and the spouses want to split the gift in order to avoid or minimize future gift tax liability, they must file two separate gift tax forms.

Our attorney files this form but does not indicate that it’s required. Apparently there is some fancy footwork regarding portability and/or non-generation-skipping (which I don’t understand) that makes it a good idea.

I know that it would be preferable to understand my attorney, and doctor, and electrician, and carpenter, but I don’t fully. I pick people that I trust (no pun intended) and then do what they suggest.

ETA: I should have mentioned that in the case of some of the kids, the money is contributed to trusts rather than outright gifting.

[Nowizard]

Hard to tell what you mean. Is this a gift of 15K from each of you, or two gifts of 15K from each?

Tim

[MarkerFM]

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle.

To each his own. On my personal scale, managing assets to qualify for Medicaid is on one end of the spectrum and highly unethical. Gifting assets to avoid taxes is on the other. In fact, I would argue not doing so is irresponsible.

[1210sda]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

I think the OP lives in a community property state. And there is an advantage being in a community state as the IRS says (in Form 709 instructions):

“ If a gift is of community property, it is considered made one-half by each spouse.”

In other words, the OP can write one $30k check from a community property account and the IRS automatically attributes $15k to each spouse. No spousal consent or tax filing is required!

Yep, Community Property state.

[3funder]

Why not do the following?

Check #1: $7,500 (from Mom)
Check #2: $7,500 (from Mom)
Check #3: $7,500 (from Dad)
Check #4: $7,500 (from Dad)

Your son can deposit each check on a different day and be done by the end of the week. Also, I do not understand why any special record-keeping would be necessary.

[chemocean]

We each donate $15K and do so as transfers in kind as they have investment accounts (at Vanguard). This way we do not incur taxes. We figure the kids will be in a lower bracket and they will not need to liquidate anyway, at least not all of it. We expect this to be a long-term investment on their behalf.

We actually had them open Vanguard accounts to facilitate this. People are willing to follow even bothersome instructions if the money is there!

I am trying to transfer in-kind AS I WRITE, Monday morning, Nov. 9, but the Vanguard system is down. I recall if there are not owners in common between the giftor's account and giftee's account, the giftor's can not execute the transfer online. Without signing in, I see a reference to a form, but I have to sign in to access the form. Does the paper form need a witness, notary or guaranteed signature?

[defscott627]

We've done this countless times. Both our CPA and attorney had recommended:

1 check signed by Dad for $15,000
1 check signed by Mom for $15,000

A signed note from Dad saying it is a $15,000 gift from Dad with no expectation of repayment
A signed note from Mom saying it is a $15,000 gift from Mom with no expectation of repayment

No gift tax forms signed because it's under the exclusion limit.

I should also add that my CPA said it does not matter if the account is joint as long as each person signs their own check. I don't know how true that is from the IRS standpoint, but we've never had a problem in the 10-15 years that we've been doing it, and we have our signed letters stating it is from each of us.

[JackoC]

For the record, discussions of dishonest behavior or bypassing the law are totally unacceptable.

The intent is to understand how to do this within the existing legal framework; in which case this discussion can continue.

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room.

The red part is a statement of forum policy which is entirely up to you forum guys and not my business.

But the bolded part seems to be an expression of opinion which I don't agree with. There is no ethical 'sliding scale' IMO wrt to tax *avoidance*. Tax stuff is ethical if it's legal, IMO. In general myriad things in life are unethical though legal, but I don't believe that category exists with tax*. The gray area is rather whether something actually *is* legal, if all facts and intentions were fully disclosed. Various borderline cases come up in threads, like for example in year X mom and dad pay for a kid's $20k wedding *and* mom and dad each give a $15k check, and don't file a gift tax return. Long threads about that have uncovered no known case where the IRS claimed the wedding was a gift from parent to child (as opposed to a gift from parents to guests or simply not a gift but an event parents held for their own purposes). At least some tax advisors tell their clients it's not a gift. But others express the opinion that if it can't be proved legal to neglect the $20k for gift tax purposes you should assume it's illegal to do so. But saying 'OK it's legal but it's unethical' is bogus IMO. To call it unethical you have to establish that it's illegal, for tax stuff IMO.

And there is IMO absolutely zero ethical issue in giving $15k per donor/recipient pair per year and not filing a gift tax return, if that's the original question. That's black letter; it would not be 'in the middle' of any ethical spectrum even assuming there was one.

*financial maneuvers to qualify for government benefits are typically most controversial, but it's often impossible IMO to separate what people claim are their 'ethical' concerns from their politics in those cases. Anyway Medicaid eligibility and asset protection is not literally a tax issue. My absolute statement of opinion above is about tax.

[wfrobinette]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

I suggest you read up on the gift tax.

"Two things keep the IRS’ hands out of most people's candy dish: the $15,000 annual exclusion in 2019 and 2020, and the $11.4 million lifetime exclusion in 2019. In 2020, the lifetime exclusion rises to $11.58 million. Stay below those and you can be generous under the radar. Go above, and you'll have to fill out a gift tax form when filing returns — but you still might avoid having to pay any gift tax"

You pay no tax until you give away 11.58 million. giving more that 15k just requires a form so they can track.

[NotWhoYouThink]

Why not do the following?

Check #1: $7,500 (from Mom)
Check #2: $7,500 (from Mom)
Check #3: $7,500 (from Dad)
Check #4: $7,500 (from Dad)

Your son can deposit each check on a different day and be done by the end of the week. Also, I do not understand why any special record-keeping would be necessary.

Because it's more complicated than a $15K check from dad and a $15K check from mom.
You don't have to hide anything, or report anything. It does make sense to keep records.

[TomatoTomahto]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

I suggest you read up on the gift tax.

"Two things keep the IRS’ hands out of most people's candy dish: the $15,000 annual exclusion in 2019 and 2020, and the $11.4 million lifetime exclusion in 2019. In 2020, the lifetime exclusion rises to $11.58 million. Stay below those and you can be generous under the radar. Go above, and you'll have to fill out a gift tax form when filing returns — but you still might avoid having to pay any gift tax"

You pay no tax until you give away 11.58 million. giving more that 15k just requires a form so they can track.

True for most, but not in MA and some other states. MA, for example, has a cliff at $1M.

[inverter]

DO NOT STRUCTURE THE TRANSACTION. I repeat DO NOT STRUCTURE THE TRANSACTION. That is illegal. Either write or do 1 check/transaction from a joint account or 2 checks/transactions from two different individual accounts. Do not attempt to do anything that would attempt to skit reporting requirements, as that is against federal law.

https://en.wikipedia.org/wiki/Structuring

[TropikThunder]

And there is IMO absolutely zero ethical issue in giving $15k per donor/recipient pair per year and not filing a gift tax return, if that's the original question. That's black letter; it would not be 'in the middle' of any ethical spectrum even assuming there was one.

The moderator’s caution I believe was to the poster who said to give the gift in cash to avoid a paper trail, not to the gifting itself. Given several people now have missed that point, it would be helpful if the moderator had been more clear.

[wfrobinette]

DO NOT STRUCTURE THE TRANSACTION. I repeat DO NOT STRUCTURE THE TRANSACTION. That is illegal. Either write or do 1 check/transaction from a joint account or 2 checks/transactions from two different individual accounts. Do not attempt to do anything that would attempt to skit reporting requirements, as that is against federal law.

https://en.wikipedia.org/wiki/Structuring

I find it easier just to write checks and report gifts then there is no issues either way.

[wfrobinette]

If we (wife and I) make two $15,000 gifts to our son, do we still have to file a gift tax form for informational purposes? It would be in the same year.

I suggest you read up on the gift tax.

"Two things keep the IRS’ hands out of most people's candy dish: the $15,000 annual exclusion in 2019 and 2020, and the $11.4 million lifetime exclusion in 2019. In 2020, the lifetime exclusion rises to $11.58 million. Stay below those and you can be generous under the radar. Go above, and you'll have to fill out a gift tax form when filing returns — but you still might avoid having to pay any gift tax"

You pay no tax until you give away 11.58 million. giving more that 15k just requires a form so they can track.

True for most, but not in MA and some other states. MA, for example, has a cliff at $1M.

That's true about states but I am focused on federal.

I feel that many people believe 15k is the tax trigger. It's not. In fact a couple can gift up to 22.8 million before taxes come into play in all but a handful of states. .

[TomatoTomahto]

I feel that many people believe 15k is the tax trigger. It's not. In fact a couple can gift up to 22.8 million before taxes come into play in all but a handful of states. .

I agree with your point. The distinction between a tax trigger and a reporting trigger is even more widespread a misunderstanding than the difference between withholding and taxation.

That said, I think everyone who will have, or might have, a sizable estate should check on their particular state. There are many BH who might be leaving $1M bit but are far from
$22.8M

[1210sda]

I feel that many people believe 15k is the tax trigger. It's not. In fact a couple can gift up to 22.8 million before taxes come into play in all but a handful of states. .

I wasn't asking about the "tax trigger", I was asking about the reporting requirement. Does the fact that it was a split gift from his mother and me (in excess of $15,000) require that we file a form 709.

We do live in a community property state.

The concensus seems to be we are not required to report this on 709.

[Pigeye Brewster]

Why not do the following?

Check #1: $7,500 (from Mom)
Check #2: $7,500 (from Mom)
Check #3: $7,500 (from Dad)
Check #4: $7,500 (from Dad)

Your son can deposit each check on a different day and be done by the end of the week. Also, I do not understand why any special record-keeping would be necessary.

What you propose is what is known as "structuring" a transaction to avoid currency transaction reports. Structuring transactions is illegal.

Regardless, checks are not subject to the $10,000 currency reporting level. Only cash. So there would be no need to structure it anyway.

[Katietsu]

I feel that many people believe 15k is the tax trigger. It's not. In fact a couple can gift up to 22.8 million before taxes come into play in all but a handful of states. .

I wasn't asking about the "tax trigger", I was asking about the reporting requirement. Does the fact that it was a split gift from his mother and me (in excess of $15,000) require that we file a form 709.

We do live in a community property state.

The concensus seems to be we are not required to report this on 709.

Please do not file any paperwork, at least on actual paper. It is not required. And, I literally think it will be 2022 before the IRS catches up.

[JackoC]

And there is IMO absolutely zero ethical issue in giving $15k per donor/recipient pair per year and not filing a gift tax return, if that's the original question. That's black letter; it would not be 'in the middle' of any ethical spectrum even assuming there was one.

The moderator’s caution I believe was to the poster who said to give the gift in cash to avoid a paper trail, not to the gifting itself. Given several people now have missed that point, it would be helpful if the moderator had been more clear.

I don't think I was missing anything. Rather you seem to be missing everything in moderator's post after the first sentence. I took the first sentence, red part, to be speaking to the implication of covering up an *illegal* act by using cash. I specifically said I was not commenting on that.

The part you quote is in response to something different, the statement by moderator:
"Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room."

This clearly implies some ethical difference between contributing to an IRA to legally avoid taxes and gifting assets to legally avoid taxes, or else what is gifting assets 'somewhere in the middle' of? I reject that concept. There is no ethical 'matter of degree' in legal tax avoidance IMO. If a tax avoidance method is legal, it's ethical; it it's illegal it's unethical. And even if one were to try to defend the concept of an 'ethical matter of degree' in legal tax avoidance in some more convoluted case, IRA v gifting assets would seem a poor example. I can't even conceive of what principal is being applied to draw any ethical distinction between those two things.

[willthrill81]

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room.

How is legally making a gift to avoid taxes not 100% above board and 'somewhere in the middle'?

Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.

- Supreme Court Justice Learned Hand J., Gregory v. Helvering, 1932

But the bolded part seems to be an expression of opinion which I don't agree with. There is no ethical 'sliding scale' IMO wrt to tax *avoidance*. Tax stuff is ethical if it's legal, IMO. In general myriad things in life are unethical though legal, but I don't believe that category exists with tax*.

+100

[themesrob]

Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.

- Supreme Court Justice Learned Hand J., Gregory v. Helvering, 1932

Learned Hand -- not a Supreme Court justice. Gregory v. Helvering is also the foundation of the "substance over form" rule, so I'm pretty sure Judge Hand wasn't a fan of structuring transactions..

[TomatoTomahto]

How is legally making a gift to avoid taxes not 100% above board and 'somewhere in the middle'?

And furthermore, it’s not entirely clear that the gifts are “to avoid taxes.” It’s a consideration of course, but honestly, I find it gratifying to give some of the money now, rather than after I’m dead. My daughter didn’t want to accept the gift until I reframed it as a gift to me.

[Misenplace]

And there is IMO absolutely zero ethical issue in giving $15k per donor/recipient pair per year and not filing a gift tax return, if that's the original question. That's black letter; it would not be 'in the middle' of any ethical spectrum even assuming there was one.

The moderator’s caution I believe was to the poster who said to give the gift in cash to avoid a paper trail, not to the gifting itself. Given several people now have missed that point, it would be helpful if the moderator had been more clear.

Yes, this was the point.

The rest was our standard caution when discussions of tax avoidance start to stray. We allow discussions so that users can avoid taxes in a legal manner. In this case, there is no question about the gifting of $15,000 being legal. In some cases, there is a question when appreciated assets are gifted (for example, when the 'step transaction' doctrine can come into play), and in some cases there is not.

Apologies that my posting of the template warning started to derail the discussion.

Moderator Misenplace

[willthrill81]

Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.

- Supreme Court Justice Learned Hand J., Gregory v. Helvering, 1932

Learned Hand -- not a Supreme Court justice. Gregory v. Helvering is also the foundation of the "substance over form" rule, so I'm pretty sure Judge Hand wasn't a fan of structuring transactions..

My apologies. Learned Hand was on the U.S. Court of Appeals for the Second Circuit, and the SCOTUS upheld his judgment.

Gifting funds within the legal limits is not 'structuring transactions'.

[J295]

Fascinating. Up to this point 46 posts for a really basic question with a very simple answer.

Doesn’t rival the tipping threads, but it’s vintage BH.

[1210sda]

Fascinating. Up to this point 46 posts for a really basic question with a very simple answer.

Doesn’t rival the tipping threads, but it’s vintage BH.

Fascinating it is!!!

Also, it sure is easy to stray from the original post.

[humblecoder]

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room.

The approach is to educate members on how to do things legally. State your points in a factual manner. If the intent strays from this objective, please report the post and we'll investigate.

I'm sorry. I completely disagree with the "matter of degree" characterization for these items. All are legal. There are no degrees. Period. Full stop.

I have posted previously about my special needs daughter. I am managing her assets LEGALLY to make sure that she qualifies for government benefits (which include Medicaid). The whole text of the law that created ABLE accounts specifically says that $100K of assets in this account are excluded from countable assets. This isn't a loophole. This is the intent of the law. Same for a Supplemental Needs Trust. Using a SNT to exclude assets is the intent of the law the created it. This isn't a loophole. This is the intent of the law.

So explain to me why these strategies are somehow in a gray area as this post implies? It certainly is more clear cut than, say, Backdoor Roths or using VTI and ITOT as wash sale pairs. However, I don't see threads talking about these strategies get a similar warning. And for the record, I do use the Backdoor Roth strategy

Sorry if I sound harsh, but the example that you used touched a nerve, I wanted to give the alternate view equal time.

[afan]

I hope one of the accountants or estate planning attorneys will join in.

My understanding was that there was no need to write two checks and no reason to file a gift tax return. From a married couple, just write one check, or gift up to $30,000 in securities and be done with it. For the securities, I assume one has to careful that the price does not bounce up enough to take you over the limit, so allow a little room.