Family cash gifts and taxes

[SDEngineer]

[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,

[/quote]

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.

[UCGal]

Any gift greater than $13k is taxable to the donor.

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

[UCGal]

Any gift greater than $13k is taxable to the donor.

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

[UCGal]

Any gift greater than $13k is taxable to the donor.

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

[UCGal]

Any gift greater than $13k is taxable to the donor.

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

[UCGal]

Any gift greater than $13k is taxable to the donor.

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

[davelj]

Here’s what he should do.

If the money is wired into his account from his mom in Vietnam, then he’s got no problem. His mom is in Vietnam, therefore the gifting limit of $12K annually doesn’t apply to her. If the money is in cash – that is, she somehow managed to end up with a bunch of cash from selling that house in Vietnam (which would be pretty weird, by the way) – then he should go to a big bank – like Wells, BofA, etc. – and deposit the cash into an account there. But he should bring any paperwork with him regarding sale of the house because the bank will want to see it. Now, even if he brings this paperwork, the bank is going to file a SAR (Suspicious Activity Report) on this transaction. But… big banks file thousands of SARs every day. So, the likelihood of any single SAR leading to an audit of any kind is extremely low because there aren’t enough folks monitoring SARs to get to even 1% of them. Which is why laundering money is not that difficult, particularly through a large bank that’s filing thousands of SARs around the country every day. Whatever your friend does, he should NOT go to a small bank to handle this transaction. Small banks don’t file many SARs and this transaction would probably get flagged by regulators during an exam.

Now, if the mom who sold the house in Vietnam is a US citizen, then she can only gift him (or anyone else) $12K/year. So, if the mom is a US citizen, none of this is going to work. Same goes for the sister and brother – they can each gift him $12K/year. The bottom line is that the maximum that any US citizen can gift to another citizen is $12K/year before triggering tax consequences for the person paying out the gift. Although, I think there’s an exception for large one-time gifts that would later be offset against the gifter’s estate for tax purposes… I think it’s called something like a one-time unified gift or something like that. But I ain’t a tax perfeshnul, so don’t take anything in this last paragraph to seriously without talking to a real perfushnul.

[davelj]

Here’s what he should do.

If the money is wired into his account from his mom in Vietnam, then he’s got no problem. His mom is in Vietnam, therefore the gifting limit of $12K annually doesn’t apply to her. If the money is in cash – that is, she somehow managed to end up with a bunch of cash from selling that house in Vietnam (which would be pretty weird, by the way) – then he should go to a big bank – like Wells, BofA, etc. – and deposit the cash into an account there. But he should bring any paperwork with him regarding sale of the house because the bank will want to see it. Now, even if he brings this paperwork, the bank is going to file a SAR (Suspicious Activity Report) on this transaction. But… big banks file thousands of SARs every day. So, the likelihood of any single SAR leading to an audit of any kind is extremely low because there aren’t enough folks monitoring SARs to get to even 1% of them. Which is why laundering money is not that difficult, particularly through a large bank that’s filing thousands of SARs around the country every day. Whatever your friend does, he should NOT go to a small bank to handle this transaction. Small banks don’t file many SARs and this transaction would probably get flagged by regulators during an exam.

Now, if the mom who sold the house in Vietnam is a US citizen, then she can only gift him (or anyone else) $12K/year. So, if the mom is a US citizen, none of this is going to work. Same goes for the sister and brother – they can each gift him $12K/year. The bottom line is that the maximum that any US citizen can gift to another citizen is $12K/year before triggering tax consequences for the person paying out the gift. Although, I think there’s an exception for large one-time gifts that would later be offset against the gifter’s estate for tax purposes… I think it’s called something like a one-time unified gift or something like that. But I ain’t a tax perfeshnul, so don’t take anything in this last paragraph to seriously without talking to a real perfushnul.

[davelj]

Here’s what he should do.

If the money is wired into his account from his mom in Vietnam, then he’s got no problem. His mom is in Vietnam, therefore the gifting limit of $12K annually doesn’t apply to her. If the money is in cash – that is, she somehow managed to end up with a bunch of cash from selling that house in Vietnam (which would be pretty weird, by the way) – then he should go to a big bank – like Wells, BofA, etc. – and deposit the cash into an account there. But he should bring any paperwork with him regarding sale of the house because the bank will want to see it. Now, even if he brings this paperwork, the bank is going to file a SAR (Suspicious Activity Report) on this transaction. But… big banks file thousands of SARs every day. So, the likelihood of any single SAR leading to an audit of any kind is extremely low because there aren’t enough folks monitoring SARs to get to even 1% of them. Which is why laundering money is not that difficult, particularly through a large bank that’s filing thousands of SARs around the country every day. Whatever your friend does, he should NOT go to a small bank to handle this transaction. Small banks don’t file many SARs and this transaction would probably get flagged by regulators during an exam.

Now, if the mom who sold the house in Vietnam is a US citizen, then she can only gift him (or anyone else) $12K/year. So, if the mom is a US citizen, none of this is going to work. Same goes for the sister and brother – they can each gift him $12K/year. The bottom line is that the maximum that any US citizen can gift to another citizen is $12K/year before triggering tax consequences for the person paying out the gift. Although, I think there’s an exception for large one-time gifts that would later be offset against the gifter’s estate for tax purposes… I think it’s called something like a one-time unified gift or something like that. But I ain’t a tax perfeshnul, so don’t take anything in this last paragraph to seriously without talking to a real perfushnul.

[davelj]

Here’s what he should do.

If the money is wired into his account from his mom in Vietnam, then he’s got no problem. His mom is in Vietnam, therefore the gifting limit of $12K annually doesn’t apply to her. If the money is in cash – that is, she somehow managed to end up with a bunch of cash from selling that house in Vietnam (which would be pretty weird, by the way) – then he should go to a big bank – like Wells, BofA, etc. – and deposit the cash into an account there. But he should bring any paperwork with him regarding sale of the house because the bank will want to see it. Now, even if he brings this paperwork, the bank is going to file a SAR (Suspicious Activity Report) on this transaction. But… big banks file thousands of SARs every day. So, the likelihood of any single SAR leading to an audit of any kind is extremely low because there aren’t enough folks monitoring SARs to get to even 1% of them. Which is why laundering money is not that difficult, particularly through a large bank that’s filing thousands of SARs around the country every day. Whatever your friend does, he should NOT go to a small bank to handle this transaction. Small banks don’t file many SARs and this transaction would probably get flagged by regulators during an exam.

Now, if the mom who sold the house in Vietnam is a US citizen, then she can only gift him (or anyone else) $12K/year. So, if the mom is a US citizen, none of this is going to work. Same goes for the sister and brother – they can each gift him $12K/year. The bottom line is that the maximum that any US citizen can gift to another citizen is $12K/year before triggering tax consequences for the person paying out the gift. Although, I think there’s an exception for large one-time gifts that would later be offset against the gifter’s estate for tax purposes… I think it’s called something like a one-time unified gift or something like that. But I ain’t a tax perfeshnul, so don’t take anything in this last paragraph to seriously without talking to a real perfushnul.

[davelj]

Here’s what he should do.

If the money is wired into his account from his mom in Vietnam, then he’s got no problem. His mom is in Vietnam, therefore the gifting limit of $12K annually doesn’t apply to her. If the money is in cash – that is, she somehow managed to end up with a bunch of cash from selling that house in Vietnam (which would be pretty weird, by the way) – then he should go to a big bank – like Wells, BofA, etc. – and deposit the cash into an account there. But he should bring any paperwork with him regarding sale of the house because the bank will want to see it. Now, even if he brings this paperwork, the bank is going to file a SAR (Suspicious Activity Report) on this transaction. But… big banks file thousands of SARs every day. So, the likelihood of any single SAR leading to an audit of any kind is extremely low because there aren’t enough folks monitoring SARs to get to even 1% of them. Which is why laundering money is not that difficult, particularly through a large bank that’s filing thousands of SARs around the country every day. Whatever your friend does, he should NOT go to a small bank to handle this transaction. Small banks don’t file many SARs and this transaction would probably get flagged by regulators during an exam.

Now, if the mom who sold the house in Vietnam is a US citizen, then she can only gift him (or anyone else) $12K/year. So, if the mom is a US citizen, none of this is going to work. Same goes for the sister and brother – they can each gift him $12K/year. The bottom line is that the maximum that any US citizen can gift to another citizen is $12K/year before triggering tax consequences for the person paying out the gift. Although, I think there’s an exception for large one-time gifts that would later be offset against the gifter’s estate for tax purposes… I think it’s called something like a one-time unified gift or something like that. But I ain’t a tax perfeshnul, so don’t take anything in this last paragraph to seriously without talking to a real perfushnul.

[zeek]

I beleive the gifiting limit has been raised to $13k for 2009.

[zeek]

I beleive the gifiting limit has been raised to $13k for 2009.

[zeek]

I beleive the gifiting limit has been raised to $13k for 2009.

[zeek]

I beleive the gifiting limit has been raised to $13k for 2009.

[Author]

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