Will a gift have to be claimed as income?

[starting over]

What is the name of your state? Kentucky

My brother is going to be receiving a large settlement from an accident and has some questions about how he can "gift" some of the money. He wants to pay off my mother & step-dad's home loan of approximately $16,000. Approximately $5,000 of their home loan was actually a loan to my brother while he was recovering from the accident. My mom & step-dad are on SS (ages 71 & 82) and SS is their only source of income. With things as they are, they don't receive enough "income" in order to have to file taxes. Will they have to claim the $16,000 from their son as income or a gift for tax purposes? We don't want my brother's generosity to cause them problems with taxes & was wondering how the best way to handle this type of situation to avoid tax implications.

Any insight would be appreciated.

 

[Snipes5]

Gifts are not taxable to the recipient.

Your parents will not incur any tax liability no matter how much money your brother or anyone else gives them.

If your brother gives them money, he can gift each of them $11,000 per year without having to fill out a Gift Tax Return. If the remainder of their mortgage is $16,000, he can gift each of them $8000, and no one will incur any tax liability, nor have to file any return.

Snipes