Gift Tax Question

[judestiny]

I am in a situation related to gift taxes and need some advice. My friend borrowed some money from me which he is unable to repay. I am planning on writing it off as a gift and need some advice on that. Unfortunately this amount is over the gift exclusion limit. My question lies around the fact that do I need to pay taxes on the money given as gift if the amount if over the exclusion limit? Is there a way I could avoid paying this money by allocating the money gifted towards the lifetime gifting clause? Should I hire a CPA or a tax lawyer to protect my self to make sure everything is filed appropriately? I need to file my taxes for this year and I am not a US citizen yet. I have been honestly paying taxes to the last cent since the 6 yrs I have been here. Would the IRS question me or audit me in a situation like this?

I will highly appreciate your response in this matter. Thanks a lot.

 

[FlyingRon]

Which limit are we talking about, the $14,000 reporting threshold or the $5MIL+ lifetime exclusion on gift/estate taxes?

 

[LdiJ]

I am in a situation related to gift taxes and need some advice. My friend borrowed some money from me which he is unable to repay. I am planning on writing it off as a gift and need some advice on that. Unfortunately this amount is over the gift exclusion limit. My question lies around the fact that do I need to pay taxes on the money given as gift if the amount if over the exclusion limit? Is there a way I could avoid paying this money by allocating the money gifted towards the lifetime gifting clause? Should I hire a CPA or a tax lawyer to protect my self to make sure everything is filed appropriately? I need to file my taxes for this year and I am not a US citizen yet. I have been honestly paying taxes to the last cent since the 6 yrs I have been here. Would the IRS question me or audit me in a situation like this?

I will highly appreciate your response in this matter. Thanks a lot.

Go see a tax professional. You do not need a CPA or a tax attorney, just an experienced professional. If you were my client I would be discussing with you the pros and cons of treating it as a bad debt write off vs treating it as a gift. Since you have neither gifted it nor written it off during 2014, it would not impact your 2014 tax return. It would be a 2015 transaction that would be handled on your 2015 tax return, if it ends up being a bad debt write off. If it ends up being a gift, a separate gift tax return might be needed. It would not impact your regular tax return if it ends up being a gift.

 

[judestiny]

Which limit are we talking about, the $14,000 reporting threshold or the $5MIL+ lifetime exclusion on gift/estate taxes?

I am talking about the $14,000 reporting threshold.

 

[judestiny]

Go see a tax professional. You do not need a CPA or a tax attorney, just an experienced professional. If you were my client I would be discussing with you the pros and cons of treating it as a bad debt write off vs treating it as a gift. Since you have neither gifted it nor written it off during 2014, it would not impact your 2014 tax return. It would be a 2015 transaction that would be handled on your 2015 tax return, if it ends up being a bad debt write off. If it ends up being a gift, a separate gift tax return might be needed. It would not impact your regular tax return if it ends up being a gift.

Thanks a lot for your guidance. That means even if i lent the money in 2014 since I haven't really forgiven the debt or treated it as a gift in 2014 it shouldnt technically go on my 2014 taxes but should be on my 2015 taxes? Also, how would the IRS determine that I lent the money to someone? Do they go through bank transactions for individuals? Not that I dont want to file the gift tax or write it off as a bad debt. But I am trying to understand how will they be aware about the fact that I lent a sum greater than the gift exclusion amount to someone?

 

[xylene]

Do you have to forgive it all this year?

What is the schedule of repayments?

Is the amount all due this year?

Is the amount due in one year over 14,000?

Can you forgive less than the reportable amount each year?

 

[anteater]

Since this is a legal forum, nobody really wants to say it. But the IRS coming across gifts that should have been reported has about the same probability as you and I spotting a woolly mammoth.

Well, not quite that low, but...

 

[Zigner]

What state?