Tax Guru – Ker$tetter Letter

Q:

Subject: question on gift taxes

 

I found your website very helpful.   I have a question though.
My partner and I will be buying a home within the next 4-6 months.   A life time friend has offered to contribute $150,000 to us both.   Could he give 12k to each of us in Dec and another 12k in Jan (no taxes) and then can he loan us the balance?   Would this be a way around the taxes?  

Thank you for your time and I hope you don’t mind the question.

Best,

A:

A combination of gifting and loans with future principal forgiveness is a common technique to avoid gift tax returns.

Your wealthy friend needs to consult with his professional tax and legal advisors to set up the actual details of how this would work since the gift tax reporting is his responsibility.

You and your partner would receive gifts free of any income tax; but you should still discuss any possible consequences of this plan with your own professional tax advisors.

Good luck.

Kerry Kerstetter