Receiving 100k as a gift

12 Replies

Good Morning, I have someone who will be helping me get my journey started by gifting me 100k.  I know they are responsible for tax forms on their end.  What's the easiest way to receive the money?  Is it as simple as having them put the money in a joint account and then i use it from there or is there a very particular way this needs to happen?

Thanks 

Mike

I dont think opening a joint account where Person A and Person B have withdrawal rights where Person A funds the account with $100,000 is considered a gift; resulting in a gift tax return.

I believe you have to actually take the money out of the joint account for it to be triggered a gift.

This may make their life more difficult as they have to track how much you take out every year.

I think the simple solution is to just have them write you a check.

Easiest or best way? The easiest way is what you said. The best way, if it is not too much trouble for them although this will save them on tax, is for them to give you 15k only and it will be tax free (look up gift tax exclusion). Then they can loan you 85k at 0% interest, make sure you pay that back or you take the tax hit and they get to write off a lost. Then you just repeat the process next year, they give you 15k, then they lend up to 70k at 0% until they fully give the entire amount.

I am not a CPA, so please check with your CPA to help that people not pay extra. Any CPA on here, feel free to check my logic.

@Daniel Y. from my understanding someone can gift $5,000,000 over their lifetime before they begin to be taxed on it. is that correct @Basit Siddiqi ? my biggest concern here is how to be legit and legal and not be blindsided by any agency or paperwork.

@Michael Weis

The Life-time gifting was increased on the recent tax reform to approximately 11 million(I don't have the exact number on me).

If the giftee's wealth is no where near that number; I likely wouldn't be too concerned about it.

Under @Daniel Y. 's suggestion - you and the giftee would be responsible for reporting interest income/interest expense on your tax returns. The IRS does not like 0% loans and may charge the giftee imputed interest income.

However, the annual limit for gifts from one person to another is $14,000.  Above that and there are tax consequences for the giver.  They should speak with their accountant for how to best deal with this.

Seems like the least hassle idea for both parties would be a joint account.
Originally posted by @Jon Holdman :

However, the annual limit for gifts from one person to another is $14,000.  Above that and there are tax consequences for the giver.  They should speak with their accountant for how to best deal with this.

 It actually increased to 15,000 for 2018. I checked before I posted that number previous. 

https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax.

Originally posted by @Basit Siddiqi :

@Michael Weis

The Life-time gifting was increased on the recent tax reform to approximately 11 million(I don't have the exact number on me).

If the giftee's wealth is no where near that number; I likely wouldn't be too concerned about it.

Under @Daniel Y.'s suggestion - you and the giftee would be responsible for reporting interest income/interest expense on your tax returns. The IRS does not like 0% loans and may charge the giftee imputed interest income.

 Too good to be true. Thanks for the input on that.

Properly done with a tax attorney, the $100k can be reduced from the giftors' lifetime exemption.  The penalty for doing this wrong is 55% so I am glad you are at least thinking about it @Michael Weis

Also, gifts of $15k/yr can apply to you and again to your spouse, if married.  A married couple can receive $30k Dec 31, then again Jan 1.  Adds up quickly. 

I would rather get it done properly with the estate tax exemption than do some hokey 0% loan thing that causes problems and could penalize the giver at a rate of 55%.  

Consult with a CPA. They would need to file a gift tax return, Form 709 with the IRS. No gift tax would actually be due since the person still has their lifetime exemption.

Definitely would not do the 0% loan.  The IRS has specific language about minimum interest rate, and then of course all the tax hassle.

I personally like the $15k tax-exempt gift (and if you have a spouse, they receive the gift too) and just pay it out over 4 years.  

@Lance Lvovsky has the best advice, and that's to consult a CPA.

I think the biggest question is.....what is your intentions/goals in real estate?

If it's buying single family homes, the $15-30k/yr is a down payment on anywhere from 1-3 houses (depending on location in the country, price range, etc).

If you goal is to buy a smaller MF (ex. 20 unit apartment), then you would likely need the full $100k for down payment and cash reserves.

If your goal is to buy into a syndication, or invest in a publicly traded REIT....you might be able to do so with either payout method (lump sum investment, or spreading it out over several years in different deals and funds).

Good luck, I wish I had your "problem!"

You can also have the gift check written to each of your children, if that applies to you! Open a joint account with them and you can draw the money

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