I wanted to make certain of something. Is the gift tax assessed "per taxpayer" or "per gift?" For example, if I decided to make a $10,000 gift to one friend, a $10,000 gift to a second friend, and a $10,000 gift to a third friend, would I be exempt from paying a gift tax - or would the IRS say that only the first gift was exempt and other gifts over $10,000 per year by the same taxpayer were taxable under the gift tax?
For what it's worth, there are a number of ways to give a friend more money that would be under the IRS's radar screen. Example. Let's say I have a friend named Bob. And I want to give him a million dollars. Fine. I collect my lottery winnings and open up a bank account in my name only, depositing one million dollars into it. And, I ask the bank to give me a generic ATM card (no VISA or MC logo). When I receive the card, I give it to Bob and say "Go for it." Bob wouldn't be able to get all of it at once. But, he'd be able to get a minimum of $200 a day from any ATM machine - as well as additionally using it at stores and gas stations that accept generic ATM cards. As far as the IRS would know, I'd be banking my own money and withdrawing my own money. And as long as Bob didn't do something stupid like depositing over $5,000 into his own bank account in one deposit (banks report all transactions over $5,000 to the IRS), he'd get the money and no one would pay the gift tax.
A more ingenious way of doing things would be to fly to Germany with Bob, visit any DeutschBank office, and buy several bearer bonds in small denominations - giving them to Bob. Bob opens up a safe deposit box - putting most of them in the box - but cashing in a few thousand dollars worth of them. Then he goes to a local American Express office and converts the cash into traveler's checks - which Bob flies home with. He uses the traveler's checks as needed ... then takes another German vacation to cash in more bearer bonds when funds get low.
On July 21, 2006, BaristaExpress wrote:
So anything below that amount is not taxable, unless you choose to report it to the IRS as income or a gift! But who would do such a thing?
To which Jorli D replied:
A decent, moral person would report it to the IRS, that's who.
A decent, moral government, wouldn't attempt to tax a man twice for the same money - just because he wishes to be generous with it.