Tax law on gifts...in Indiana

[grioghair]

*I am living in Indiana*

I have a question on the tax laws in Indiana regarding gifts - which needs a little explaining:

My wife's ex-husband recently lost his job and is currently applying to cash in his 401K - and sum of around $12,000. He wants to donate it as a gift to my wife. The explanation is as follows: my wife's ex still lives with us, as he and my wife both have a teenage son who is autistic, and he is helping to care for him. I am on low income, my wife does not work - and now my wife's ex does not work, either...but that may soon change.

What is the law regarding tax exemption for a sum of $12,000 or less in the state of Indiana?

Any help greatfully acknowledged,

Steve

 

[Snipes5]

Gifts are not taxed to the recipient.

"Ex-husband" will be taxed and penalized on money withdrawn from 401K unless he meets certain criteria.

As for Indiana, I don't have a clue, but most states have a website you can go to for specific tax information.

Snipes

 

[abezon]

In general, there are more exceptions to the penalties (medical expenses for taxpayer + dependents > 7.5% of AGI, for example). You might consider rolling the 401k into an IRA, then cashing out the IRA as you need the money. This could save you a few hundred dollars.