Ways to get around the "Gift tax"

[Redraidernurse]

I am looking for thoughts on an idea that was brought up on how to get around the gift tax. I have heard that you can take out a "loan" from the person giving the gift money, and never repay the loan so instead the loan is "forgiven" by the gift giver in $13,000 increments each year. Any insights?

[jIM_Ohio]

Check with an attorney and check with a tax professional

if you get different answers, ask one more attorney and one more tax professional.

[jpg7n16]

If there was no interest on the loan, the person issuing the loan would have what is called "imputed interest income" meaning that they would have to include phantom interest on their income tax return (and thus would be subject to income tax instead of gift tax)

Imputed Interest Definition


Otherwise, you would have to create a formal loan document accounting for a current market rate of interest, and then yeah you could set it up. (Tax Law (Questions About Taxes): Gift/Inheritance money, gain capital, gift taxes) But if the person issuing the loan dies that loan is still in their estate. You'd need legal teams to make sure that in the event of death, the loan terms would remain favorable.

So see Jim's post above.