Discussion:Multiple gifts to move property out of estate
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Discussion Forum Index --> Tax Questions --> Multiple gifts to move property out of estate
Landon5784 (talk|edits) said: | 3 August 2008 |
| In CA parents have home and stocks and 4 children. Their house is to be left entirely to only one child. It needs to be moved out of their estate quickly. They have very little estate tax exemption left due to prior year gifts. If house does not move out of estate it's value along with the stocks will generate enough estate tax to eat up most of those stocks.
Question: Any problem with each parent gifting 12,000 (24,000 total)to each child, and then the three who do not get the house then gifting their gift (12,000 at a time) over to the child who does get the house. The result is there are stocks left (result of not having large estate) for the other three to divide up. Where is the problem here? | |
RoyDaleOne (talk|edits) said: | 3 August 2008 |
| Sec. 2035 | |
| 3 August 2008 | |
| What if one of the children decides to keep their gift of the house and not transfer it. Also, the children will be using their unified gift tax credit and may want something in return for it. | |
| August 3, 2008 | |
| The kids won't be using any gift tax credit, they'll be covered by their annual exclusions. If they don't transfer their interests in the house, then the parents just don't give them the stocks that they otherwise would.
Those aren't the problem; the problem is that, if there's an understanding for the gifts to be passed on, they'll be treated as gifts directly from the parents to the ultimate recipient. How have the parents used up their estate tax exemption? You mean that they have used up the gift tax exemption? That should leave them with another million estate-tax-free if they die this year, rising to $2.5 million if they make it to 2009. | |
Landon5784 (talk|edits) said: | 4 August 2008 |
| RoyDaleOne
Doesn't Sub section C 3. of Section 2035 "(3) Marital and small transfers
Paragraph (1) shall not apply to any transfer (other than a
transfer with respect to a life insurance policy) made during a
calendar year to any donee if the decedent was not required by
section 6019 (other than by reason of section 6019(2)) to file
any gift tax return for such year with respect to transfers to
such donee. "
mean that the annual exempt amount of 24,000 is not required to be included in the estate ? Yes LH2004 you're right the gift of that amount won't use up any of the kids unified credit. And as far as any "understanding" how would the IRS know? Also Blrgcpa...the kids can be trusted. Thanks for all your input | |
Landon5784 (talk|edits) said: | 4 August 2008 |
| Also..yes LH2004 the parents have used up almost all of their 2,000,000 gift exemption on prior year gifts. They gave highly appreciable property early on. | |
RoyDaleOne (talk|edits) said: | 4 August 2008 |
| And as far as any "understanding" how would the IRS know?
Landon please don't ask questions like that one, we are not here to help you, if that is part of the answer. | |
Landon5784 (talk|edits) said: | 4 August 2008 |
| Let me re phrase then because I think it is an important question "how does the IRS determine intent" when their rules say "heads they win and tails we loose" ?
Also... doesn't Sub section C 3. of Section 2035 imply that the annual exempt amount of 24,000 is not required to be included in the estate if the gift is made within three years of the grantors death ? That is how I read it? | |
Landon5784 (talk|edits) said: | 4 August 2008 |
| the 24,000 is actually 12,000 from each spouse | |
| 4 August 2008 | |
| Do we have enough facts? Won't the gift taxes on the transfer of the house be brought back into the estate, 2035? Either that, or this house must not be worth very much. | |
| 4 August 2008 | |
| An excellent attorney told me that the IRS will collapse such gifts if there is an advance agreement. Also, he advised that any gifts that could be linked, can be made a little safer the more they are separated by time and the amounts are not the same.
I read of a case where the gift check was actually endorsed over to the ultimate recipient the same day, which didn't fly. So, it's very tricky. Each child receiving the original check would have to be able to say to the IRS, if asked, that he was not bound to make any future gifts to his sibling. He would want to wait a while to make future gifts, and his ability to not make the gift would actually be required. But, certainly within families, gifts are made between siblings when they feel that inheritances are not fairly distributed between them. Might the estate be equalized by putting a provision in the will that each child's inheritance is to be adjusted by prior gifts? | |
RoyDaleOne (talk|edits) said: | 4 August 2008 |
| The IRS does not determine intent.
When asked the taxpayer has to prove the intent, the burden is on the taxpayer. Agree with Landon 2035c3 understanding. | |
Landon5784 (talk|edits) said: | 4 August 2008 |
| Thanks all | |
