Dependent question for Income tax

[captain149]

What is the name of your state (only U.S. law)? KS
A friends fiance lives in a house that is already paid for and owned by her mother. Her mother gives her about $7000.00 a month for spending money and for her bills. Her mother has been claiming her as a dependent for the last 3 years. His fiance is 33. Her mother lives in a town 200 miles away. His fiance has a 5 year old son. My question is can her mother really claim her as a dependent? His fiance does not file income tax returns. My friend is very worried he might be getting married into some major tax issues.

[davew128]

Originally Posted by captain149

What is the name of your state (only U.S. law)? KS
A friends fiance lives in a house that is already paid for and owned by her mother. Her mother gives her about $7000.00 a month for spending money and for her bills. Her mother has been claiming her as a dependent for the last 3 years. His fiance is 33. Her mother lives in a town 200 miles away. His fiance has a 5 year old son. My question is can her mother really claim her as a dependent?

Looks like it.

My friend is very worried he might be getting married into some major tax issues.

Exactly what tax issue would there be? If she has no income and doesn't have to file a return, why is it HER tax issue if her mother claims her as a dependent? It wouldn't be HIS tax issue after marriage even if there were an issue to begin with.

[captain149]

Well the issue would be. Your relatives can only gift you $12,000 a year so anymore money then that is considered income. There are rules as to what qualifies someone as a dependent. I thought to be a dependent you actually had to live in the same house as the person claiming you. His fiance's mother deposits $5000-$8000 a month to pay her bills and for spending money. Was just curious as to what constitutes a dependent. I told him that I did not see how she could not file a tax return since her mother is basically just giving her $75,000 to 90,000 thousand a year. Also told him I do not think she would qualify as a dependent since she lives 200 miles away in a home her mother owns. Just curious if someone knew the definition of a dependent for tax filing purposes.

[davew128]

Originally Posted by captain149

Well the issue would be. Your relatives can only gift you $12,000 a year so anymore money then that is considered income.

Oh really?

There are rules as to what qualifies someone as a dependent. I thought to be a dependent you actually had to live in the same house as the person claiming you. His fiance's mother deposits $5000-$8000 a month to pay her bills and for spending money. Was just curious as to what constitutes a dependent. I told him that I did not see how she could not file a tax return since her mother is basically just giving her $75,000 to 90,000 thousand a year. Also told him I do not think she would qualify as a dependent since she lives 200 miles away in a home her mother owns. Just curious if someone knew the definition of a dependent for tax filing purposes.

You're right. You have to live in the same home. You didn't answer MY question, why is this a matter for your friend's fiance to worry about? If she's not filing a return, it's not going to affect her one way or the other. It's her mother's concern, not hers.

[captain149]

Well I think the mother in law could be in trouble for claiming her as a dependent and I think his fiance can get in trouble for not filing a tax return for the last two years when she is rec about 80-90K a year in income from her mother. If he marries her and the IRS finds out then he would be having to hire lawyers to fight the irs and possible other charges. Not something I would think he would want to get involved in. Trying to watch out for my buddy.

[FlyingRon]

Gifts are not income. They're not federally taxable by the recipient. The donor may face tax issues, but that's a different story.

And if you didn't miss the sarcasm above, the dependent is allowed NOT to live with you and still qualify. In the case of the incomeless adult daughter, it's acceptable.

[anteater]

Originally Posted by captain149

....I think his fiance can get in trouble for not filing a tax return for the last two years when she is rec about 80-90K a year in income from her mother....

It isn't income. It is a gift. MIL should be filing gift tax returns.

Why should your friend care if MIL gets into deep tax doo-doo?

(And, if MIL needs some other dependents, I'll volunteer!)

[LdiJ]

Originally Posted by captain149

What is the name of your state (only U.S. law)? KS
A friends fiance lives in a house that is already paid for and owned by her mother. Her mother gives her about $7000.00 a month for spending money and for her bills. Her mother has been claiming her as a dependent for the last 3 years. His fiance is 33. Her mother lives in a town 200 miles away. His fiance has a 5 year old son. My question is can her mother really claim her as a dependent? His fiance does not file income tax returns. My friend is very worried he might be getting married into some major tax issues.

Her mother is clearly providing more than 50% of her support, clearly meets the relationship test, and clearly meets the residence (living in the US) test, so yes, her mother absolutely can claim her. Once she gets married to your friend however, its a totally different story.

If her mother can afford to give her 7000.00 a month for bills and spending money, then the dependency exemption probably does not do much for her mother.

As the others said, there is no gift tax due from the recipient of a gift, so there are no tax issues for your friend's fiance, nor would there be any issues for your friend.

I could see some other potential "issues" but not regarding taxes.

[davew128]

Originally Posted by captain149

Trying to watch out for my buddy.

Not doing a very good job of it. When my buddy got married, my advice against it was based on her oldest kid with a total bleep of a father and the fact that I couldn't bench press her. THAT'S looking out for your buddy.