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Legal question?

Topic closed. 36 replies. Last post 10 years ago by justxploring.

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Jorli D's avatar - nw saucyelf2.jpg
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Posted: July 23, 2006, 10:01 pm - IP Logged

Q: Who pays the gift tax?

The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

 

You speak with a forked tongue or maybe you just don't comprehend what you read.

I also find it interesting that you are a newbie and this was the one topic to draw your attention.  Why is that?

Of all the threads on LP, you were drawn to this one.  Do explain your motives

    AlecWest's avatar - alec
    Vader, Washington
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    Posted: July 23, 2006, 10:25 pm - IP Logged

    Q: Who pays the gift tax?

    The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

     

    You speak with a forked tongue or maybe you just don't comprehend what you read.

    I also find it interesting that you are a newbie and this was the one topic to draw your attention.  Why is that?

    Of all the threads on LP, you were drawn to this one.  Do explain your motives

    First, if I win a $10,000,000 cash-option jackpot, I'll pay 39.6% income tax on it.  In short, taxes have already been paid.  If I gave $1,000,000 to my friend Bob, it doesn't matter whether he or I paid the gift tax.  The gift tax is a tax on top of income upon which taxes have already been paid (ie., double taxation on the same income).  Maybe you don't comprehend what you read.

    As to what brought me to this particular thread, I suspect it's the same thing that brought you.  And, frankly, I don't have to explain my motives for being here to you or anyone else ... nor do you have to explain your motives for being here to me or anyone else. 

      Jorli D's avatar - nw saucyelf2.jpg
      Michigan
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      Posted: July 23, 2006, 10:33 pm - IP Logged

      Then we are clear on this point Alec.  There are a lot of people who hate to be taxed and will find ways to try to steal from the government by not paying taxes.  It is the law of this land and if you don't like that law, there are other places to go.  You apparently sleep well at night knowing you have cheated on your taxes.  There will come nights when you won't sleep so comfortably if you're ever caught cheating on your taxes.

      I wish you luck.  Uncle Sam isn't always so forgiving.

        AlecWest's avatar - alec
        Vader, Washington
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        Posted: July 23, 2006, 11:02 pm - IP Logged

        Jorli,

        Yes, we are clear on this point.  And if I went to jail for doing what I suggest, so be it.  To some people it's called "breaking the law."  To others, like Henry David Thoreau, it's "civil disobedience."  Either way, there's jail time for not paying expected taxes (just like Thoreau had to serve) ... if you get caught.  But given the two scenarios I mentioned in my first post to this thread, I don't really see how that would be possible.

        But, I think I'd sleep comfortably enough.  If I knowingly allowed the IRS to double-tax me, I'd not sleep very well at all.  And stopping them from doing so would bother me just as much as putting a burglar alarm on my front door - to prevent a thief from taking what's mine, even if that thief had the blessings of the government.

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          New Mexico
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          Posted: July 24, 2006, 1:17 am - IP Logged

          First, if I win a $10,000,000 cash-option jackpot, I'll pay 39.6% income tax on it.  In short, taxes have already been paid.  If I gave $1,000,000 to my friend Bob, it doesn't matter whether he or I paid the gift tax.  The gift tax is a tax on top of income upon which taxes have already been paid (ie., double taxation on the same income).  Maybe you don't comprehend what you read.

          As to what brought me to this particular thread, I suspect it's the same thing that brought you.  And, frankly, I don't have to explain my motives for being here to you or anyone else ... nor do you have to explain your motives for being here to me or anyone else. 

          Welcome to LP AlecWest.

          Here's hoping you have a long and fruitful tenure here.

          Good luck,

          Jack

          Absorb the good, ignore the bad, weigh the ugly.

          It's about number behavior.

          Egos don't count.

           

          Dedicated to the memory of Big Loooser

           

            AlecWest's avatar - alec
            Vader, Washington
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            Posted: July 24, 2006, 1:51 am - IP Logged

            Welcome to LP AlecWest.

            Here's hoping you have a long and fruitful tenure here.

            Good luck,

            Jack

            Jack,

            Well, I'll have a long and fruitful tenure here as long as I manage to stay out of jail (grin).  To be honest, I'd probably pay the darn gift tax.  But, I've been reading Walden (by Thoreau) lately and have been in an antsy mood about our tax peculiarities.

            BTW, I'm not a complete newbie.  I've been here since January ... but lurking more than posting.  FWIW, anyone who's interested in why I'm here (lurking most of the time) only has to check out my profile page and click on the link to my web-homepage.  It will explain much. 

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              New Mexico
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              Posted: July 24, 2006, 2:14 am - IP Logged

              Jack,

              Well, I'll have a long and fruitful tenure here as long as I manage to stay out of jail (grin).  To be honest, I'd probably pay the darn gift tax.  But, I've been reading Walden (by Thoreau) lately and have been in an antsy mood about our tax peculiarities.

              BTW, I'm not a complete newbie.  I've been here since January ... but lurking more than posting.  FWIW, anyone who's interested in why I'm here (lurking most of the time) only has to check out my profile page and click on the link to my web-homepage.  It will explain much. 

              AlecWest:

              Thanks.  I visited your page.

              While I don't share your concern for what becomes of lottery winners, we do share an admiration for Thoreau.

              Best to you,

              Jack

              Absorb the good, ignore the bad, weigh the ugly.

              It's about number behavior.

              Egos don't count.

               

              Dedicated to the memory of Big Loooser

               

                justxploring's avatar - villiarna
                Wandering Aimlessly
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                Posted: July 24, 2006, 4:46 am - IP Logged

                The 2006 annual exclusion for gift tax is $12,000 not $10,000.  The annual & lifetime exclusions change from time to time, so it's always best to check with the IRS or a CPA. This is not illegal or cheating.  You can also pay premiums for medical insurance, medical bills and school tuition. The IRS has a list of these gifts.  It's a legal way of reducing one's estate tax before death. Most of the time the donor pays any gift tax above the legal exclusion, not the recipient of the gift, but they can agree in advance on another arrangement. Anytime there is a question about taxation, the best suggestion I have is to seek professional help, meaning consult an attorney who specialized in estate planning and taxation. (There have been many threads in the past on this subject.) BTW, it doesn't matter if you give cash or a check, or even if you buy someone a house. It's the total value of your gift that the IRS considers. Although it would be "cheating" if you occasionally gave someone a few thousand bucks cash over & above the $12,000 I doubt if anyone would notice unless that person began living well beyond his means. However, it's still cheating. There are so many other things a person can do to help a friend or relative which are all legal, but I'm not going to list them. Many wealthy business people hire friends and pay them huge salaries for doing very little and let them live in "corporate" condos, etc.

                Regarding the original question on legal separation, again an attorney is really the only person who is qualified to answer such a question. Divorce laws are not Federal. In many states, the term "separation" means very little until a divorce has been finalized. All it does is protect both parties from being charged with acts like abandonment.  If you agree to separate, your wife can't just say "Judge, one day he just didn't come home from work. I don't know what happened to him!" It can also establish monetary obligations such as who pays the mortgage, child support, etc.  Mike is right about waiting.  Technically there's no such thing since a person who signs a separation agreement often has the same rights as if he/she is still married, but you'd have to check with a lawyer in your state.  Some states don't recognize it at all and some actually require it before a divorce. Jorli is correct about the possibility of considering a gift when determining child support (again it's a state matter) but that also becomes a moral question. What I mean is that if someone receives a gift he often has no legal obligation to tell anyone about it, but he also shouldn't lie under oath or on a signed legal document.  I'll stop here, since there are too many exceptions depending on the state and a judge's interpretation of the law.

                  AlecWest's avatar - alec
                  Vader, Washington
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                  Posted: July 24, 2006, 6:27 am - IP Logged

                  AlecWest:

                  Thanks.  I visited your page.

                  While I don't share your concern for what becomes of lottery winners, we do share an admiration for Thoreau.

                  Best to you,

                  Jack

                  Jack,

                  I understand.  I suspect my opinions on anonimity and privacy as they apply to lottery winners are minority opinions.  But, that's kind of what the site was for ... the unsung minority that has those concerns.  Hmm ... that might be a topic for another thread.

                  Regards,

                  Alec

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                    NY
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                    Posted: July 24, 2006, 11:15 am - IP Logged

                    "A decent, moral government, wouldn't attempt to tax a man twice for the same money"

                    Arguments about how decent or moral it is aside, for the most part the government we've got  doesn't tax us twice for the same money. Money changes hands, and that's when most  taxes are levied. The gift tax is simply an income tax on the amount of the gift. Since the tax is paid by the person making the gift it's just not as obvious as when taxes are levied against what your employer gives you.

                      AlecWest's avatar - alec
                      Vader, Washington
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                      Posted: July 24, 2006, 2:45 pm - IP Logged

                      "A decent, moral government, wouldn't attempt to tax a man twice for the same money"

                      Arguments about how decent or moral it is aside, for the most part the government we've got  doesn't tax us twice for the same money. Money changes hands, and that's when most  taxes are levied. The gift tax is simply an income tax on the amount of the gift. Since the tax is paid by the person making the gift it's just not as obvious as when taxes are levied against what your employer gives you.

                      KY,

                      Usually, the only time taxes are levied when money changes hands is during a transaction for goods or services where two people reap tangible benefits - a buyer/seller or employer/employee.  Therefore, the reason why each party is taxed on the same money is because they both get a tangible benefit.  However, if a benefactor gives his money away to a friend, only the friend receives a tangible benefit.  The benefactor is out the money.  So, comparing transactions for goods or services to philanthropy is an apples/oranges comparison.

                      But you're right - overall, the government doesn't tax us twice for the same money unless it involves a tangible benefit between two people.  The gift tax is a glaring exception.

                      Still, I suppose a clever person could avoid the gift tax legally.  There are a number of non-profit entities out there whose administrative expenses (ie., "salaries" paid to its principals) far outshadow any expenditure on their stated purpose - while still retaining their non-profit status.  If I wanted to give a lot of money to a friend, it would be a simple matter of getting him hooked up with an attorney who specializes in 501(c) incorporations ... wait till his incorporation is approved ... then hand over the money tax free - money I'd even be able to take as a tax deduction at year's end (grin).

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                        NASHVILLE, TENN
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                        Posted: July 24, 2006, 9:05 pm - IP Logged

                        Another avenue you might wish to consider is making this person a loan instead of a gift.  See an attorney.  He can draw up all the proper legal papers.

                        The difference will be that you, as the loaner, will never enforce collection.  But should the IRS claim you made your friend a gift, refer to the Federal court case United States vs.Harold Ford.

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                          Posted: July 25, 2006, 2:11 pm - IP Logged

                          KY,

                          Usually, the only time taxes are levied when money changes hands is during a transaction for goods or services where two people reap tangible benefits - a buyer/seller or employer/employee.  Therefore, the reason why each party is taxed on the same money is because they both get a tangible benefit.  However, if a benefactor gives his money away to a friend, only the friend receives a tangible benefit.  The benefactor is out the money.  So, comparing transactions for goods or services to philanthropy is an apples/oranges comparison.

                          But you're right - overall, the government doesn't tax us twice for the same money unless it involves a tangible benefit between two people.  The gift tax is a glaring exception.

                          Still, I suppose a clever person could avoid the gift tax legally.  There are a number of non-profit entities out there whose administrative expenses (ie., "salaries" paid to its principals) far outshadow any expenditure on their stated purpose - while still retaining their non-profit status.  If I wanted to give a lot of money to a friend, it would be a simple matter of getting him hooked up with an attorney who specializes in 501(c) incorporations ... wait till his incorporation is approved ... then hand over the money tax free - money I'd even be able to take as a tax deduction at year's end (grin).


                          The government simply taxes transactions. That most financial transactions involve a tangible benefit is just a function of human nature. We don't have unlimited resources, so we want something in return when we expend our resources.

                          I'm sure you're a nice, deserving guy, but if I simply give you 20 grand I don't think I'm going to call it philanthropy. You're right that I wouldn't get a tangible benefit, but why would I give away money if I didn't believe I got some benefit? Some warm, fuzzy feelings are worth plenty. Does it make sense that you should pay more taxes on 20 grand that you're paid for a year of full time work than on 20 grand that is simply handed to you? For that matter, if I can get a haircut for $8 do I get more of a tangible benefit with my usual $20 haircut or if I pay $1000 like some celebrities seem to be fond of?  I'd also suggest that returns on investments don't necessarily result in a tangible gain to both parties, but I don't think most people will complain that much about taxes on that income. Some people made a fortune dumping Enron stock, but that certainly wasn't balanced by a significant gain on the other side, for example. Sometimes tangible is an apple and sometimes it's an orange. 

                          Foolish borrowing practices aside, the government has to collect as much money as they spend. How much they spend and the details of how and where they collect the money can (and probably will) be argued until the end of time, but $10 is $10.  If they're taking it out of my pockets it doesn't matter which pockets they take it out of.

                          There certainly are plenty of ways to give somebody money that won't be a gift. Setting up a non-profit might work, but if 80 to 90% of the income goes to salaries, especially salaries of just one or two people, it might be tough to keep the IRS convinced that it isn't fraudulent, let alone a legitimate nonprofit. If I ever find myself in the position to give away large sums to friends or family I might look into a business to manage and invest  my assets. The income produced by the company but not passed on to me, such as salaries and vehicle expenses, wouldn't be taxable income. That's not any different than earning it and donating to a charitable cause. If the time comes I'm sure I can find somebody far more knowledgeable who will be glad to advise me.

                          As far as somebody's suggestion about loaning money, the IRS will expect you to charge a  reasonable rate of interest, and they'll expect taxes on that. Not collecting interest or not enforcing payment could lead to questions that are almost as embarassing as the ones you'd get if they found out you made a gift and didn't report it.

                            TheGameGrl's avatar - character catafly.jpg
                            A long and winding road
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                            Posted: July 25, 2006, 9:43 pm - IP Logged

                            A direct and definitive answer based solely on the limited information supplied: yes your friend can retain the money without the spouse getting a dime. Since you didnt ask anyone here for how to accomplish this, its best to answer your question directly and leave it as such.

                            Thanks for the hypothetical question.

                            ~~Is it true, Is it kind,Is it necessary. ~~~

                            christmas holly jolly numbers: 255,303,6911, 474,477 silver:47,gold:79.

                              guesser's avatar - Lottery-017.jpg

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                              Posted: July 26, 2006, 12:10 am - IP Logged

                              Jorli, can you please explain to me why folks on this website have a problem with 'newbies' such as Alec West, or me ?.

                               

                              I am a member on several other websites, maybe 30 or 40 that I visit from time-to-time, and when I joined this one, I was attacked as well.

                              Why is that ?   I've never been attacked on any website for being a noob aside from this one, so I am wondering why some folks attack noobs on THIS website ? It's uncalled for.

                              Noobs have to start SOMEWHERE, correct ?   So if not on this thread, which one ?

                               

                              Changing topic now:

                               

                              I don't mind paying taxes at all, I have no problem paying my fair share, but I hardly call paying 240 mill out of 365 mill 'fair'.