Gift Tax Liablity questions

[trm350]

Hi, I am in New York and my questions are as follows.

I will be recieving a large settlement shortly for several million dollars. Now I would like to give a gift of approximately $3.5 Million to a very close friend. What kind of taxes do i face? Does my friend face any tax issues recieving this? Can I use this lifetime unified credit all at once to help alleviate some of the gift tax? Can i deduct the gift tax first from my total settlement sum first to have my settlement be lower when i have to pay federal tax? How will all of this workout? Please let me know any and all information you can give me to clear this up and make it a bit easier. Thank you very much

trm

 

[dmode101]

You can use your $1,000,000 credit all at once, but the tax on $2,489,000 (after the $11,000 annual exclusion) will be quite steep -- $674,610...and the tax would be payable by you. You *can* elect to do a "net gift" whereby the recipient pays the tax, but the overall burden won't change. You can't deduct the gift tax before receiving the settlemtn because you can't gift it until you receive it...and you can't assign any of the settlement to your friend for income tax purposes. If you really intend to do this, there are serious tax and other issues that you should consider so you should see a tax professional.

 

[trm350]

Thank you very much for your response and help!

 

[trm350]

Can you tell me what other issues I would face? I do still intend to do this but I will also seek a tax professional. Right now I am trying to seek as much information as possible. If you can shed any more light on the other issues that would be appreciated.

Thank you

tm