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Gift Taxes

Topic closed. 31 replies. Last post 11 years ago by delS.

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Sparta, NJ
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July 9, 2005
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Posted: November 15, 2005, 1:43 pm - IP Logged

Its easy to give away money.  Rolling a heavy ball up hill isn't always the best way to reach the top.

Hire someone to make you 55% profit.  Pay them huge hiring bonus.  Pay their expenses.  Provide housing, transportation, etc.  Pay huge wages. Fire them for failing to meet their contract. Pay huge termination bonus. They keep house, money, and all other assets they earned.  Read the article. the head of Disney did that - and it held up in court.  Remember, you're rich.  Get used to being special.

Cheers

|||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

I only trust myself - and that's a questionable choice

    justxploring's avatar - villiarna
    Wandering Aimlessly
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    Posted: November 28, 2005, 8:14 pm - IP Logged

    I came across this thread because I was searching for tax info. I haven't won anything yet, but I was curious. I'll read the article, but I know the whole idea of "gift" tax is to keep a wealthy person from giving away his taxable estate when he gets sick or in trouble.  I think it's ludicrous to pay federal and state tax on winnings and then have to pay tax if you want to give some away, but I don't run the IRS. However, Chewie is right when he says you can hire relatives to work for you.  It's done all the time and it doesn't mean they have to show up for work!  Regarding the debit card, that can be traced.  However, after the allowable $11,000 annually, you can always stick a few thousand cash in your wallet when you visit your sister or daughter.

      justxploring's avatar - villiarna
      Wandering Aimlessly
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      Posted: November 28, 2005, 8:48 pm - IP Logged

      Somehow I lost part of my post. I wasn't telling people to commit tax fraud, but remarking on how wealthy people spend money so freely, like $10,000 or more on shopping sprees, so it would be unlikely a few thousand here and there would be missed if you were worth tens of millions.  Gosh, I'm getting paranoid..like the IRS reads these posts?? I'm so poor, if they showed up at my place they'd probably pay me money! Frown But seriously, a good tax attorney could give the best advice. That being said, I've gotten some very, very bad advice from attorneys, no kidding. So how do you find a good one once you've won?

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        Posted: November 28, 2005, 9:34 pm - IP Logged

        Not only chances of bad advice from lawyers but also bad advice from financial planners. So the bottom line is that in additional to getting advice from these advisors, you must also be fairly knowledgeable and also be interested in participating in managing your affairs instead of just leaving it for others to manage and  go around partying on 24/7 basis.

          time*treat's avatar - radar

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          Posted: November 28, 2005, 10:45 pm - IP Logged

          justxploring said: Gosh, I'm getting paranoid..like the IRS reads these posts??

          not only do they read these posts, if you're a powerseller on an auction site, they're taking a closer look at your returns too. Google that for a good scare.

          It's only paranoia if they're NOT out to get you. 

          In neo-conned Amerika, bank robs you.
          Alcohol, Tobacco, and Firearms should be the name of a convenience store, not a govnoment agency.

            sirbrad's avatar - Lottery-062.jpg
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            Posted: November 29, 2005, 12:30 am - IP Logged

            Yeah the IRS does not want anyone to get out of working and paying more taxes. They take advantage of the lottery BIG time, and steal from all the pots. Almost makes you want to boycott the lottery, but then of course you also still stay poor. I think that if you can prove that you had a pool with a family member, you can avoid some of the taxes? I am not sure how much that would be though. I would most likely set one family member up with a million dollars, at the highest returnable interest rate possible. Even at 4%, that would be about $4,000 a month. Plenty of money to last anyone who only has to worry about utility bills, and luxury items.

             

              sirbrad's avatar - Lottery-062.jpg
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              Posted: November 29, 2005, 12:41 am - IP Logged

              http://www.turbotax.com/articles/TheGiftTax.html

               

              "If you give people a lot of money or property, you might have to pay a federal gift tax. But most gifts are not subject to the gift tax. For instance, you can give up to the annual exclusion amount ($11,000 in 2004) to a person, every year, without facing any gift taxes, and without the recipient owing an income tax on the gifts. And you can give up to $1,000,000 in gifts, total, in your lifetime, before you start owing the gift tax."

              So does that mean you can give it all at once one time and be over with it? That is what I would do. What about $11,000 a year after that? Course I would not be giving much anyway, I have a lot of catching up to do giving myself stuff that I have never had.

               

                sirbrad's avatar - Lottery-062.jpg
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                Posted: November 29, 2005, 12:46 am - IP Logged

                What does all this mean for the gift tax? The lifetime gift tax exemption is $1,000,000 and will continue to be $1,000,000 for the indefinite future. So you can make gifts that are worth up to a million bucks during your lifetime without paying the gift tax.

                The maximum gift tax rate for gifts exceeding $1,000,000 will drop from 48 percent in 2004 to 45 percent in 2009, and to 35 percent in 2010 and beyond, which is the same as the maximum individual tax rate.

                So why did Congress dramatically reduce the estate tax, but keep the gift tax if the gift tax was originally created to prevent people from escaping the estate tax? Probably because of the other main reason for the gift tax, which is to prevent family members from shifting assets among themselves to equalize income-tax rates. In our progressive tax system, where some people must pay much higher marginal tax rates than other people, the gift tax restricts the ability of a family to minimize their income taxes by moving income-producing assets among the members.

                 

                Ok then, I guess so. I will remember that too. Those IRS folks are greedy suckers! But I think I just read that it was $2,000,000 now due to inflation? The LP should hire a tax expert to come here daily and answer all tax related questions. Smile

                  Badger's avatar - adu50016 NorthAmericanBadger.jpg
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                  Posted: November 29, 2005, 6:35 am - IP Logged

                  Good morning-

                  I'm not an expert tax person, and God knows the tax attorney would be my first hire if I won big, but here goes

                  This is for all the experts that we have here at LP, and I am not being flip about my statement.  Say you won the $310 MM Jackpot, and after all the initial taxes were taken out, you walked away with $114,000,000 cash option.  You had 25 family and Friends you planned on giving anywhere from $20,000 to $1,000,000.  The gift tax law says you can give away up to $11,000 before any the gift tax kicks in. 

                  My question is, roughly speaking what amount of taxes would I be looking at for giving away 25 gifts above the $11,000 mark?

                   

                  I stress I am also no tax expert. But my brother has done people's income taxes for decades now, and we were talking about this within the last year (just a conversation) -- I seem to remember him saying that anything over the 11K per year would be subject to a 30% gift tax. And the tax is assessed on the person giving the gift.

                  Therefore, say you wanted to give someone $20,000 during one year (regardless of how you did it, one 20K lump sum or five $4,000 checks, whatever) then you would owe the Fed govt and additional  $2,700 on your taxes for the $9,000 over the limit.

                  Put another way, for every person you gave $100,000 to , it would cost you $126,700 .

                  This is the way I remember from our conversation, for what its worth.

                  ============

                  How can you tell if a politician is lying?

                  Answer: His lips are moving.

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                    md
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                    Posted: November 29, 2005, 9:38 am - IP Logged

                    I appreciate everyone's opinion on this subject, and the info as well.  Below is a table I found on msn.com/money  For what its worth to any future LP Jackpot Winners, you may want to copy and paste and file away.

                    Estate and Gift Taxes

                    Unified Gift and Estate Tax Rates

                    If the amount is:               Tax is:
                     Over     But not over         Tax       +%    Excess Over
                    $        0    $   10,000               0    18    $        0
                     10,000        20,000           1,800    20        10,000
                     20,000        40,000           3,800    22        20,000
                     40,000        60,000           8,200    24        40,000
                     60,000        80,000          13,000    26        60,000
                     80,000       100,000          18,200    28        80,000
                     100,000       150,000          23,800    30       100,000
                     150,000       250,000          38,800    32       150,000
                     250,000       500,000          70,800    34       250,000
                     500,000       750,000         155,800    37       500,000
                     750,000     1,000,000         248,300    39       750,000
                    1,000,000     1,250,000         345,800    41     1,000,000
                    1,250,000     1,500,000         448,300    43     1,250,000
                    1,500,000     2,000,000         555,800    45     1,500,000
                    2,000,000     2,500,000         780,800    49     2,000,000
                    2,500,000     3,000,000       1,025,800    53     2,500,000
                    3,000,000     .........       1,290,800    55     3,000,000

                    Note 1. The benefits of the graduated rates and the unified credit are phased out for estates of over $10,000,000 for 2001 and prior years.

                    Note 2. For decedents dying and gifts made after December 31, 2001, the top rate for estate and gift taxes will be 50% on amounts over $2.5 million.

                    Note 3. The top rate on estates of decedents dying in, and gifts made in the years indicated, will decline as follows:

                     

                      whitmansm2's avatar - Lottery-029.jpg
                      Right here...can't you see me?
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                      Posted: November 30, 2005, 8:29 am - IP Logged

                      Wouldn't it be easier just to hire your family memebers?  Take out the state and fed taxes for them and let them be "self employed" and they can get it back when they do their taxes?  After it gets to be whatever amount you were going to give them; fire them.  lol

                       

                      I want to give my mom 1mil.  So I hire her to.....uh.......uhm.....take my trash out.  I pay her $10,000 a month plus, as a sign on bonus, I give her a house.  After $900,000 is given to her, I fire her for missing the trash man one time.  As a part of the leaving, I give her $100,000 for severence pay and she keeps the house. 

                      Wouldn't that be better than having to worry about gift tax?

                      (just wondering)

                      No No

                      Don't cry over spilled milk.  Go milk another cow!!

                      Stephanie

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                        md
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                        Posted: November 30, 2005, 12:17 pm - IP Logged

                        The bottom line is, it is better to do the right thing up front regardless of your feelings, opinions, or experiences with the IRS.  The problem with your scenario is, the moment your family members monies run out, they are going to blow the whistle on your tax avoidance scam, and your butt will end up broke, in jail and another sad lottery story.  I posted the table because it would appear to be more prudent in looking at how much you plan to give a loved one, factor in the amount of tax you will owe on the gift and consider it on your books as the total.

                        $50,000 gift + $8,200 = $58,200.00  and be done with the issue.  Where most people get their butts in trouble is expending the energy trying to "get over."  Face it, taxes are apart of life like death.  Its going to happen.  Do I like or advocate for either?  NO!  

                          Fwup's avatar - babylaugh 086.gif

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                          Posted: November 30, 2005, 1:27 pm - IP Logged

                          Couldn't you just form a trust, and name yourself and the people you want to give money to as members of the trust? Then claim the jackpot in the name of the trust instead of yourself. That way you wouldn't be double taxed. Instead of the IRS taking their share and then giving what's left to you, they would take their share and then give what's left to everybody.

                            time*treat's avatar - radar

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                            Posted: November 30, 2005, 4:28 pm - IP Logged

                            10G to take out the trash runs you into a "prevailing wage" issue. No No

                            Loans are not taxable, though. Interest is.

                            With that info and an actuary table, you could figure how to loan mom enough to cover the interest payments and get use of the mill in her expected lifetime. You'd better win quick; a million doesn't go as far as it used to. 

                             

                            In neo-conned Amerika, bank robs you.
                            Alcohol, Tobacco, and Firearms should be the name of a convenience store, not a govnoment agency.

                              sirbrad's avatar - Lottery-062.jpg
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                              Posted: November 30, 2005, 6:19 pm - IP Logged

                              I read something about a $2,000,000 "exclusion." What does that mean? You can give up to $2 million dollars once a year, or one time only without having to pay tax?