PDA

View Full Version : Gifting Information please read



unclerod
10-24-2009, 01:01 PM
For discussion purposes let’s assume the following points of fact:
1. For tax purposes a “gift” is always given at its basis (cost)
2. For tax purposes a “gift” also carries a fair market value (FMV)
3. Gifts are always done after taxes have been paid by person giving gift
4. Each US citizen can give up to $13,000 to any man, women or child in calendar year
5. No Gift Tax Return is filed to report this gift up to $13,000
6. Each US citizen can gift up to 1 million (FMV of Assets) in his/her lifetime without the recipient paying taxes, must file Gift Tax Return to report these gifts and uses up part of their exclusion from estate taxes on their death. In 2009 this exclusion is 3.5 million
7. For illustration I am figuring on a revalue of 1 IQD to 1 USD, if greater do your own calculations
8. For illustration 1--- 25,000 denomination dinar that cost $25.00 USD


GIFTS TO FAMILY AND FRIENDS
1--- 25,000 denomination dinar PRIOR to revalue MY recommendation
1. You are giving that person a gift that cost you $25.00
2. You are giving that person a gift with a FMV of $25.00
3. This gift is below the $13,000 that you can give them and not file tax return
4. After revalue they have taxable income to report on taxes of $24,975.00 ($25,000.00 cash in value minus $25.00 basis, your original cost)
5. You do not report this as taxable, the recipient does
6. If this is your dependant less than 18 yrs old (24 if student) they will pay YOUR maximum tax rate on this gain


1--- 25,000 denomination dinar AFTER revalue NOT my recommendation
1. You are giving that person a gift that cost you $25.00
2. You are giving that person a gift with a FMV of $25000.00
3. This gift is above the $13,000 and now you have to file a gift tax return
4. No gift tax is due but you use up part of your exclusion at death
5. The taxable income is the same as above $24,975.00



DONATIONS TO CHURCH AND OTHER 501c3 NON PROFITS
1--- 25,000 denomination dinar AFTER revalue MY recommendation
1. You are giving that organization a gift that cost you $25.00
2. You are giving that organization a gift with a FMV of $25,000.00
3. You get to claim an itemized deduction for a donation of $25,000.00
4. You do not have to report any taxable income because the charity cashes in the dinar and does not pay any taxes on the income


1--- 25,000 denomination dinar PRIOR to revalue NOT my recommendation
1. You are giving that organization a gift that cost you $25.00
2. You are giving that organization a gift with a FMV of $25.00
3. You get to claim an itemized deduction for a donation of $25.00
4. You do not have to report any taxable income because the charity cashes in the dinar and does not pay any taxes on the income

dljhoffman
10-24-2009, 01:33 PM
thank you unclerod. this has helped me tremendously! apreciate your time and effort in this.

katlap1
10-24-2009, 02:08 PM
WOW! You put it in a way I can understand. Love it, Thanks!

santafe
10-24-2009, 02:51 PM
Thanks for taking the time to put this together... Really helps a lot to understand this.

unclerod
10-24-2009, 02:53 PM
Feel free to print this off so you can study it!

unclerod
10-24-2009, 02:54 PM
if you have questions you can IM or PM me
Thanks Rod

kirkster1520
10-24-2009, 03:16 PM
I have a question about getting around this gift tax or limitation. I have posted this before, but have never gotten an answer about it.

Let's say you have a son or daughter you want to give money to. You open up a joint bank account. Now, you both are the owners of this account. You deposit $50,000 dollars in this account. Your son or daughter uses that money whenever they need anything either by check or Debit card. You already paid taxes on this money before it was put in this account.

Do you think this will work? Would they have to claim the money as income or report it on their tax form somewhere? To me, it looks like this would work and get around the gift limitation. Any input would be appreciated.

unclerod
10-24-2009, 04:03 PM
A couple of answers for you, i think you would be fine except if you put the after tax money in that account and your son/daughter used it all up in one or two years you have really given them a gift of more that $13.000.00 per year. The only concern is if you died with an estate over the exemption amount: 3.5 million for 2009, unlimited for 2010, but goes back to 1 million for 2011, the irs could track that monies that you had given away back in 2009 and you would loose some of your exemption. Do i think it is highly likely that that will happen at your passing, not a huge chance but it is a chance. I am certain you must have reasons not to gift the dinar prior to revalue and letting him/her pay the taxes, but depending on their ages they may in fact pay less tax on the gain then you would. This is just another thought for you. Hope this helps

Kcffmike
10-24-2009, 04:15 PM
When giving it as a gift before the RV, how do you prove it was given ahead of time?

latreia
10-24-2009, 04:27 PM
why would u get a 25k deduction by giving to them? would it count toward your other IQD?

scruzman
10-24-2009, 04:29 PM
When giving it as a gift before the RV, how do you prove it was given ahead of time?


Here's the rub and the one addition I would make to Unclerod's informative post. If you are giving pre-RV Dinar and a substantial amount you may want to file the gift tax return, even though it is not required, to start the statue of limitations clock ticking. This will limit the amount of time the IRS can audit you. Otherwise it's open-ended. Furthermore by filing the form 709 (gift tax return) you will state the date of the gift so that now it is on record.

Another option, more self-serving, but still valid is to have a notice of gift notarized. The statement should provide all the pertinent info and include the recipient's signature, notarized, to indicate that the gift was received. You might want to do the statement AND file a 709. Now you have a notarized statement with a contemporaneous date and are starting the statue of limitations.

wiselaura
10-24-2009, 04:33 PM
Unclerod, thanks immensely for the gifting information which saves a lot of research and time for each of us. Best wishes always.

JoeReeves
10-24-2009, 05:03 PM
Credit goes to the person who actually posted this form data first, I'm not sure who it was. Thanks.

Use this form to create a legal record of change in ownership for any dinars you may give to someone as a gift. Use a separate copy for each person you give to.
__________________________________________________ ______________


Letter of Gifting

To Whom It May Concern:
On this, the below mentioned Date of Transaction, I, _____________________ (Giftor) do hereby make gift of the number of Iraqi Dinars, hard currency, stated below, to the below mentioned “Giftee” in the presence of the below mentioned Notary Public, here representing and serving the state of __________________.

By and with direct knowledge of this activity, Notary is authenticating the transfer of this gift.

_______________________________
Date of Transaction

_______________________________
Number of Dinars

_______________________________
Giftor Name

_______________________________
Giftor Signature

_______________________________
Giftor Social Security Number

_______________________________
Giftee Name

_______________________________
Giftee Signature

_______________________________
Giftee Social Security Number

__________________________________________________ ______________


Notary:
This transaction has been prepared and I hereby attest that the above mentioned accurately portrayed their role in bringing this transaction to a close signing before me.


_______________________________
Notary Name

_______________________________
Notary Signature

_______________________________
Notary ID#

_______________________________
Date of Witness

(State Seal)

County _____________

State _______________

__________________________________________________ ______________

Note: The person giving the gift is the Giftor and the Giftee is the person receiving the gift.
__________________________________________________ ______________

BillyB
10-24-2009, 05:10 PM
Scruzman--when giving D before the rv, won't the individual (recipient ) claim it as their own, pay their own tax as if they bought it themselves? I don't quite understand the scenerio where the gift documentation is necessary--probably has to do with children (most of whom have ss#s these days).
Or, is there some "prove up that you really purchased them" that happens at exchange?
Please clarify, if possible.

unclerod
10-24-2009, 05:10 PM
i dont understand your question...IM or PM me your question and i will try and answer

unclerod
10-24-2009, 05:13 PM
latreia i do not understand your question

lusinjan
10-24-2009, 06:57 PM
Scruzman--when giving D before the rv, won't the individual (recipient ) claim it as their own, pay their own tax as if they bought it themselves? I don't quite understand the scenerio where the gift documentation is necessary--probably has to do with children (most of whom have ss#s these days).
Or, is there some "prove up that you really purchased them" that happens at exchange?
Please clarify, if possible.


BillyB you're trying to avoid gift tax AND income tax on the same transaction. When you make a significant gift like this with a quickly (potentially) changing value it could be very important to "prove" the date of the gift. Otherwise the donor could be hit with gift tax and the donee could still have income tax to pay. Very bad result. What I'm suggesting is legitimizing the otherwise "under the table" giving of dinar to someone prior to the RV. Under the table will likely work fine but the person reporting the exchange and paying tax has no proof of anything, cost basis, date of acquisition, etc. Could be that the worst case scenario is paying tax on short term gain. But what if it was long-term to the actual buyer? Just pointing out that there are so many "ifs" here that everyone needs to see a good CPA to sort out YOUR options. REading all this stuff is good and gets you familiar but until a pro knows YOUR situation they can't properly advise you. Good luck to you!

unclerod
10-25-2009, 12:54 PM
You are forgetting in your calculation that you reduce your taxable income by the FMV amount of donation you give to the charity. in your senario you would not tax the whole 1 million gain but only 900,000 gain and the the schedule A deduction of 100,000 leaves you taxable gain of 800,000 times your 40% tax rate. So then you have 900,000 minus 320,000 tax leaves you 580,000 in your pocket

ranidrenid
10-25-2009, 12:57 PM
Your recomendation on POST RV donations for most if all on this site is useless as we will be ABOVE the charitable donation threshold somewhere above $150,000.00. Therefore, the following IMHO would be better. Let's say you have 1,000,000 IQD and the RV is 1 for 1 and you have cap gains tax of 40% (rounded 39.5% for ease of use here)(also state taxes not calculated here but should work the same way).

BEFORE RV:

1,000,000 IQD minus 10% = 900,000 IQD thus $900,000.00.
Subtract 40% for taxes on the $900,000.00 equals $540,000 take home

AFTER RV:

1,000,000 IQD equals $1,000,000 then subtract 40% for taxes equals $600,000.00 then take 10% of the whole $1,000,000.00 equals $100,000 off the $600,000.00 then take home is only $500,000.00.

So we see a +$40,000.00 difference in pre-RV and we accomplished the same thing PLUS the benefactor cashes in without taxes. Juat MHO but the numbers seem to work.

ETB, in your AFTER RV example, if the benefactor cashes in the dinar you donate to them without taxes then you would only be taxed on the $900,000 you cash in leaving you $540,000. It is the same result in both cases. I think donating AFTER RV still comes out better on both state and federal taxes with the deductions. You are probably right about most on this site going over the threshhold but most will probably not go over it without the dinar RVing. In the end, everyone should see a professional to evaluate their situation and act accordingly.

ranidrenid
10-25-2009, 01:01 PM
You are forgetting in your calculation that you reduce your taxable income by the FMV amount of donation you give to the charity. in your senario you would not tax the whole 1 million gain but only 900,000 gain and the the schedule A deduction of 100,000 leaves you taxable gain of 800,000 times your 40% tax rate. So then you have 900,000 minus 320,000 tax leaves you 580,000 in your pocket

unclerod, I think his assumption was that most people would not get the 100,000 deduction.

unclerod
10-25-2009, 02:36 PM
you can claim a charitable deduction up to 50% of your AGI (adjusted gross income) which is the figure at the bottom of page one of your 1040 form.

StarBrite
10-25-2009, 02:54 PM
VERY clear .... thank you!
Let's hope we can be gifting this week!!!!


StarBrite

unclerod
10-25-2009, 04:16 PM
Bass i guess that is where we differ on this...tax brackets have nothing to do with if you can take a deduction on schedule A for donations to qualified charitable causes

scruzman
10-25-2009, 05:07 PM
Bass i guess that is where we differ on this...tax brackets have nothing to do with if you can take a deduction on schedule A for donations to qualified charitable causes


Precisely Unclerod ... Bass is confusing some threshhold notion ... I've run numerous income tax projections (on Lacerte Pro software) for my own situation and absolutely nothing is limiting my charitable donations and they are into the 7 digits.

unclerod
10-25-2009, 05:30 PM
i have done the very same thing but i am done arguing about it....tax brackets do not have any reduction to schedule A deductions...I think Pres Obama has talked about limiting the charitable deduction for those in the upper brackets...but right now the tax code allows it
Thanks for your backup

SasssyMe
10-25-2009, 05:43 PM
Ernest T Bass, I'm not sure where you are getting that ppl in a certain tax bracket can't take a charitable donation...that may have been a law at some point but sure hasn't been for a long time. It's one of the things Obama is wanting to change because he says it's not fair that some ppl get a 35% tax deduction for contributions and some only get 10 or 15%. He hasn't changed it yet, however, so these contributions can be made up to 50% of your income...which in your scenario, $100,000 contribution is far less than 50% of $900,000.

I, also, have used tax software to figure my contribution amounts and tax liability after RV and have had no such limitations that you are referring to.

http://www.irs.gov/pub/irs-pdf/p526.pdf You can go there to find more information on contributions.

ranidrenid
10-25-2009, 05:49 PM
In the post RV I would be taxed on what I turned in which is the WHOLE 1mil IQD then I could give the 10% after that which I CANNOT deduct from taxes due to the bracket I am in at that point.
If I turn in the 900k since I gave 100k PRIOR to RV then it matters not what the chariety gets as it is no longer mine and thus has no effect on my taxes. And once again, you CANNOT deduct this giving in this tax bracket PERIOD!

Why would you turn in the entire 1mil IQD? Just turn in 900k and donate the other 100k. And I would look check with a CPA or tax attorney to clear up the charitable donation limit question.

Larry42
10-25-2009, 06:04 PM
When giving it as a gift before the RV, how do you prove it was given ahead of time?

I sent each of my adult children a "gift" through the US Mail with a letter asking them to keep the dated letter and post marked envelope until I instructed them later what to do with it. I think that would be adequate proof of a gift prior to RV. JMO

samiam
10-25-2009, 06:55 PM
Does anyone know of a form or letter you can fill our if you need to
exchange for someone else? I have a friend I need to do this for.
Thanks for any information anyone can share

goldenpond
11-09-2009, 12:58 AM
After reading Pub526, pages 11-13, I'm more confused than ever on the whole issue. Plus the fact that The Tax Relief Act of 2006 phases out the restrictions on personal exemptions and overall limitation on itemized deductions for all taxpayers by 2010 according to the following schedule:
Reduced by 1/3 in taxable years beginning in 2006 and 2007.
Reduced by 2/3 in taxable years beginning in 2008 and 2009.
Eliminated for taxable years beginning in 2010.


It still is not clear, however, whether this cash we give after RV but prior to cashin and called Ordinary income by IRS and taxed at 35% is cash, a capital asset, or what for tax purposes and how we should take charitable contributions. This whole thing creates a real need for good tax cpa or atty to advise before we do anything.

Pull_da_Switch_Now_Shabs!
11-09-2009, 08:25 AM
Ok, i want to thank everyone for their input on this subject so far because we will have to cross this bridge when the time comes...I have a few scenarios i want to harsh out..Lets say for the benefit of these scenarios it has rv'ed/RI'ed and I have given my 10% and opened up a savings account called "uncle sams arm and leg" so that come tax time i have the money to the side and have made a little extra of it....so i'm square with uncle sam

1)

As someone mentioned earlier what happens if I open several accounts and in the states where my family lives i add them as co-account holders and they get access and (for the benefit of this example) Platinum amex cards for their use... wouldn't this work because its my account but they just have use of it? That's the same companies have now with business accounts and folks who work for them.... or is it a different animal?

2)
Lets say i have family overseas and open up an account and add them to it.. keep in mind i've paid all my taxes... can i do the same thing as above and they have access to it?

3)
Like lottery winners who chip in money weekly to purchase tickets and share the winnings.. who is to say we did not do the same thing... afterall we could have all chipped in to buy the dinars but i was the one who happened to buy it....So come rv/ri i give them their dinars and they do whatever they want to it... why wouldn't this work?

Obviously i'm not a tax expert and will be able to afford one after rv/ri..:) but for now i'm just curious to your feedback.. from anyone and everyone who wants to chip in...

mickey
11-10-2009, 06:54 AM
What about selling dinar to family after the rv at what was paid for it you could get a reciept or cancelled check.

pstlpknmama
11-10-2009, 09:27 AM
I have a question about getting around this gift tax or limitation. I have posted this before, but have never gotten an answer about it.

Let's say you have a son or daughter you want to give money to. You open up a joint bank account. Now, you both are the owners of this account. You deposit $50,000 dollars in this account. Your son or daughter uses that money whenever they need anything either by check or Debit card. You already paid taxes on this money before it was put in this account.

Do you think this will work? Would they have to claim the money as income or report it on their tax form somewhere? To me, it looks like this would work and get around the gift limitation. Any input would be appreciated.

kirkster...this is what i am doing for my non-minor children. I bought dinars with the intention of giving some to my kids. I had them write me a check for the amount that i paid for their part of the dinars i intend to give them. I am holding their checks until the dinar rv. When it does rv i will then cash their checks knowing they will have the money to cover it. The checks are dated the day that i bought the dinars. I'm thinking this will work but I don't know for sure. I really don't see why it wouldn't. If anyone knows please reply.

SasssyMe
12-01-2009, 04:52 PM
bump bump bump