Getting Around Tax Implcations From $50k Gift?

Question

I've tapped into a family member for funding. It's my understanding that anything over $15,000 is taxable. Since 50>15, how can my donor avoid being taxed on this "gift".

Ashish Acharya · Answer

Your understanding is not correct.

If there is a gift, it’s the donor responsibility to file for the gift tax. Not you.

You don’t have any tax implications.

Also, are you it’s not a loan?

Eamonn McElroy · Answer

A gift tax return will have to be filed by the donor for the year in which the gift was made.  Generally no gift tax is paid if the donor has remaining lifetime exclusion available.  Is the donor married?  If yes the annual exclusion amount is $30,000 per donee.

Are you sure it's a no strings attached gift, and not a loan or investment?

Kevin Gray · Answer

Based on what you're saying, it seems like you will not be paying back the $50k.

IF the $50k is going to be paid back at some point  (either by selling the property, refinancing, etc...), then this could be treated as an interest free loan.  The gift would no longer be the $50k principal of the loan, but the foregone interest would be the actual gift.  The AFR (applicable federal rate) is what would be used on a standard loan similar to yours, so this AFR amount would be considered the gift...which on 50K, would be much less than the annual 15k exclusion.  Meaning, no taxable gift at all if under $15k in interest for the year.

More steps and paperwork involved to adequately record as a loan and not a gift.

Eamonn McElroy · Answer

@David Seale

The 2019 annual lifetime exclusion is $11.4 million.  $11.18 million is the 2018 tax year amount.

Generally no gift tax is due as long as the donor has available lifetime exclusion to offset the gift amount in excess of the annual exclusion.

It appears your family member will have a gift tax return filing obligation next spring.  If the family member isn't comfortable with that particular tax return and is uncertain about any potential gift tax due based on their individual facts and circumstances it may be advisable to consult a professional.

David Seale · Answer

@Eamonn McElroy @Ashish Acharya Well, the said family member says it's a gift. They are not married. I know there are no implications on me, but I understood it to be on the donor and that is incorrect.

If i understand  "lifetime exclusion gift tax" (had to look it up) correctly it means that means the donor can gift up to $11.18M in their lifetime and never have to pay a dime in taxes?

Getting Around Tax Implcations From $50k Gift?

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