[quote=jimmyle]I have several questions for a friend who has too much cash but low reported income. He is buying a house right now and suddenly needs to put $240K into his bank. He plans to give cash to his sister and brother and they write him a check as a gift.
1. Can his brother and sister give him a cash gift? what is the limit? what are the tax consequences?
2. Same question for nephews and nieces.
Thanks,
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I can tell you that your friend had better have a really good explanation for the money no matter how he gets it into his account.
Large cash deposits are flagged by banks to both the IRS and the FBI. It won’t matter how the money gets in (small incremental deposits or large ones), nor will it matter whether he has enough relatives (unlikely) to re-gift him his own funds under the taxable gift limit (I believe 13K is the current limit).
Pretty much, he’s guaranteed both an audit and an investigation for money laundering. And since he’s committing tax fraud, the best he can hope are some pretty stiff fines (assuming that the cash is from under-the-table type work, and is not actually ill-gotten gains).
Edited to add:
Having read the reply above, I’m afraid his best course (assuming the sale was recent) is simply to take the tax hit and declare and deposit the money himself. Have him talk to a CPA to find out what his tax obligations are in this situation (it’s unusual, and I have no idea how the IRS would treat it). He’ll still get audited (that much cash movement is virtually guaranteed to draw an audit), and very well might draw the attention of the FBI, but he’ll be above board and legal, and as long as he pays the due taxes (whatever they happen to be), nothing bad will occur.
Again, if he attempts to use a gifting scheme to move that much money into his account and avoid taxes, he is committing tax fraud. He might wind up losing ALL of the cash to penalties and fines.
