What are tax consequences for receiving gift

I am expecting a substantial gift, what are the tax consequences? Whatever, I read says, I don’t have to report it as income and pay no taxes. Are there any gotcha’s?

I am expecting a substantial gift, what are the tax consequences? Whatever, I read says, I don’t have to report it as income and pay no taxes. Are there any gotcha’s?

N.B.: I am neither a CPA nor a tax attorney.

One gotcha is if the gift is big enough, the donor must pay the gift tax. If the donor fails to do this, it is my understanding the IRS may come to you to get the gift tax.

Are there any gotcha’s?

One gotcha that comes to mind is you will all of a sudden have friends and relatives you never knew you had. Kinda like winning the lottery or being a first round pick in the NFL.

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If the gift is from a prince in Nigeria, I wouldn’t spend it all in one place. :slight_smile:

When you say you read that it doesn’t have to be reported as income and is tax free, do you mean that notice came with the gift, or that you read it online somewhere?

I would think it depends on the nature of the gift. If it is cash from a family member, you can receive up to $15k tax free. If this is an inheritance, it may depend on how the money is bequeathed. If this is a prize from a contest or bonus from work, it’s almost always taxable.

Fuskie
Who believes the gift tax applies to the giver of cash amounts over $15k rather than the receiver…


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I am expecting a substantial gift, what are the tax consequences?

For you, as the receiver of the gift, there are no immediate tax consequences. As already mentioned, the giver of the gift may, at a minimum, have to report the gift to the IRS using Form 709 https://www.irs.gov/forms-pubs/about-form-709

Depending on what the gift consists of, there may be future tax consequences for you, and you need to get documentation of the basis from the giver. If the gift is in the form of assets that have a basis, and the current value is more than the basis, the giver’s basis will become your basis. If the assets are currently worth less than the basis, then the current worth will become your basis. In either case, you need to have the documentation of the giver’s basis, so you can show that you are using the correct basis as your basis. There is a section entitled “Property Received as a Gift” in IRS Pub 551 https://www.irs.gov/pub/irs-pdf/p551.pdf that you can read to get the details of determining the correct basis.

AJ

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it is a gift/ inheritance from my mom to the tune of couple of hundred thousand $$$. Her tax attorney will take care of her taxes, and he mentioned that I don’t have to pay taxes, since she is paying.

If the assets are currently worth less than the basis, then the current worth will become your basis.

That’s half the story. If the assets are currently worth less than the basis, you need to track two amounts: the adjusted cost basis of the donor and the current worth. When you dispose of the asset, you will use the “adjusted cost basis” to determine a taxable gain and the “current worth” to determine a loss. If the disposition value is in-between the two tracked values, there is neither a gain nor a loss.

Not mentioned in any of the previous replies, you might have to file Form 3520 with the IRS to report the gift. The requirements are that the gift come from a nonresident alien and is greater than $100,000.

Ira

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One gotcha is if the gift is big enough, the donor must pay the gift tax. If the donor fails to do this, it is my understanding the IRS may come to you to get the gift tax.

Unless things changed over the past 25 years, which is highly possible, doubt that would be the scenario.

Long story short, from a highly unfriendly family situation, I received a large gift. The donor then turned around come tax filing time and tried to sue me and/or get the IRS to collect from me. Not so fast, called my lawyer who sent the donor a copy of the IRS code and a nice way of saying f*** off.

JLC

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it is a gift/ inheritance from my mom to the tune of couple of hundred thousand $$$.

The law treats a “gift” (giver still alive) differently from an “inheritance” (which you get via a will of a decedent or from being the beneficiary of someone’s account). It’s important to know which one of those it is.

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it is a gift.