Ernie Klein <ecklein[at]pacbell.net> wrote:

- quote -

It's not a question of guilt or innnocence. It's a question of whether
a gift tax is imposed or not. And the courts have held that the tax is
imposed if one person makes gifts in excess of the annual exclusion,
and another person ends up receiving those gifts.

Is the failure to file a gift tax return in this case tax fraud? No.
But that doesn't mean the tax won't be imposed.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Barry Margolin <barmar[at]alum.mit.edu> wrote in
news:barmar-386245.11365701032008[at]comcast.dca.giganews.com:

<much snippage
- quote -

think of the IRS.

--
Best regards
Han
email address is invalid

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <Xns9A5458B024F47ikkezelf[at]199.45.49.11> ,
Han <nobody[at]nospam.not> wrote:

- quote -

I suspect lots of people do it around the same time of the year, e.g.
Christmas.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

sethb[at]panix.com (Seth) wrote in news:fq99o3$t9c$1[at]reader2.panix.com:

- quote -

right after the grandparents made their donations would be frowned upon
by the IRS. Better if kids give their kids money way before or way after
the grandparents do.


--
Best regards
Han
email address is invalid

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <barmar-88F365.19424229022008[at]comcast.dca.giganews.com> ,
Barry Margolin <barmar[at]alum.mit.edu> wrote:

- quote -

I am not a gambler so I don't know the odds.

In the scenario I purposed, there was no collusion, in fact the giver
was totally unaware of the redistribution of his gifts.

Having been both on the receiving end of gifts (from my Aunt and Mother
when they were alive), and on the giving end to my two daughters and 4
grand children. I think I can safely say that gift money sometimes is
pooled within families to purchase large items (like an RV -- maybe more
often than you think), however I don't think that anyone has done
anything improper at all when the receivers of the gifts do that, and
the gift giver had no intention or knowledge of the final outcome.

Others has said that intention plays no part, but intention seems to be
the only thing that makes an otherwise innocent person, guilty.
- quote -

Unless it is an innocent turkey that has been mistaken for a duck and
has no way to prove that he is really a turkey.

--
-Ernie-

--
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In article <ecklein-C8A5F7.12501929022008[at]news.newsguy.com> ,
Ernie Klein <ecklein[at]pacbell.net> wrote:

- quote -

If he gives the max to 4 people, and three of them all give the max to
the fourth, what's the chance that there was no collusion?

The IRS isn't held to a "beyond a reasonable doubt" standard, like
criminal prosecution. If it walks like a duck and quacks like a duck,
it's a duck.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <Xns9A5358360781Cavocatstuyahoofr[at]130.133.1.4> ,
Stuart Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

One cannot prove a negative. The grandfather can only prove the true
facts, which are: He gave 4 gifts.

- quote -

So, you are saying, that even though a gift giver cannot place any
conditions on a gift when it is given, and cannot have any control over
the gift after it is given, he can still be held responsible, (and
penalized), for actions the recipient of the gift might take with the
gift after the fact.

That seems to be a paradox, in as the only way a gift giver could
protect himself from having the nature of his gift changed after the
fact would be to place his own conditions on the use of the gift, but
such conditions would themselves change the nature of the gift and would
not be allowed.

--
-Ernie-

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <Xns9A5358360781Cavocatstuyahoofr[at]130.133.1.4> ,
Stuart Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

Basically it seems to come down to the fact that the IRS doesn't believe
in big coincidences. If all the money somehow ends up in on person's
account, it strains credibility.

The counter-example someone else posted, where grandpa gives to his
children and granchildren, and his children also give to their children
(his grandchildren), might be the only exception. All the individual
gifts are normal occurrences, so the "coincidence" is practically
inevitable.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Ernie Klein <ecklein[at]pacbell.net> wrote:
- quote -

I haven't seen a case like that brought. If it were, it could go
either way. The courts don't seem to look at intent - just initial
cause and ultimate intent.

- quote -

The answer is that they don't need to. It's up to the taxpayer to
prove that the transaction was exempt, not the other way around. And
that's difficult to do when the money is traced.

- quote -

I wouldn't be surprised if a court upheld a requirement to file a
gift tax return in the second case, either. Though the fact that I
wasn't able to find a case like that indicates that the IRS may be
erring on the side of caution.

- quote -

Under some circumstances I am sure that could conceivably happen,
yes.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article
<2fbc6c06-3ed6-4d72-9f52-962cb60d344d[at]e6g2000prf.googlegroups.com> ,
Bill Brown <brownwp[at]longwood.edu> wrote:

- quote -

You missed my point. I said the gifts were NOT conditional and the
grandfather didn't know (and still doesn't know) that his gifts to the
grand children were re-gifted to the daughter, but the result would be
the same.

I don't see how an IRS audit could tell the difference between the
conspiracy as suggested by the OP (where the grandfather wanted to
launder money through the grandchildren to the daughter -- not allowed)
and the situation where he gave 4 gifts and the grandchildren on their
own decided to give the money to their mother, without the grandfather
even knowing about it.

Following the money, the two situations look the same to an outsider,
but in the first the grandfather would be required to file a gift tax
return and if he didn't he would probably owe penalties, etc.; in the
second the grandfather gave 4 separate and unconnected gifts without any
conditions which do not require any filing.

If called on it by the IRS, the grandfather could not defend himself and
could only say "Huh?", because he had/has no idea what happened to the
money after he gave it.

Which brings back my question: Can third parties, on their own, without
any knowledge of the original gift giver, change the nature of his gift
from non-taxable to taxable through their own actions of re-gifting the
money?

--
-Ernie-

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <pLAxj.264041$MJ6.247442[at]bgtnsc05-news.ops.worldnet.att.net> ,
inky dink <isisis[at]skl.not> wrote:

- quote -

I can think of a case that might.

Grandfather gives $12,000 to each of his children, children-in-law,
and grandchildren. That same year, some of his children give their
children gifts.

Seth

--
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On Feb 28, 3:47*pm, Ernie Klein <eckl...[at]pacbell.net> wrote:
- quote -

"Conditional gifts" aren't gifts, they're compensation for desired
behavior.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <fq73de$duj$1[at]reader2.panix.com> , sethb[at]panix.com (Seth)
wrote:

- quote -

Getting away from the OP, where everyone knew what was going on, I can
see a scenario where it is not apparent at all.

Suppose grandfather, having some extra money, decided, without any other
motive at all, to give his adult daughter $24K (married couple - joint
gift) , and three grandchildren $12K each.

So far, no problem, happens every day, and shouldn't raise anyones
suspicions.

Now the daughter thinks: "If I only had $60K I could start my own
business", and knowing that her father had given her three children $12K
each, she asks the kids to help out and give her the money and we will
all be better off in the end -- but DON'T tell grandpa you gave me the
money -- he might not like it.

Later comes the IRS auditor who sees $48K of grandfathers money ends up
in daughters hands.

What happens? Can third party(s) (daughter and grandchildren) through
their own, independent actions, make the giver, (who only wanted to make
4 separate gifts that would NOT be subject to gift tax), suddenly
subject to the very gift tax he sought to avoid?

It seems to me, that even if the grandfather anticipated such an
outcome, he couldn't make his gift(s) conditional on the grandchildren
not re-gifting, as that would itself attach strings to the gift(s) that
HE gave. However, in my scenario, the grandfather was entirely innocent
of any wrong doing and had no way to anticipate the re-gifting.

--
-Ernie-

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <Xns9A508E85E9EF4avocatstuyahoofr[at]130.133.1.4> ,
Stuart Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

The child has a gift in the amount of the interest debt cancelled.
The parent has interest income either way. (They got the interest,
and might have given it back to their child as a gift.)

Seth

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <40c62781-de4b-45c3-917d-63f78c841bda[at]c33g2000hsd.googlegroups.com> ,
Bill Brown <brownwp[at]longwood.edu> wrote:
- quote -

But from the IRS's viewpoint on financial transactions, those look
exactly the same: Grandpa gives Joe $12K, and Joe gives it to his
brother.

- quote -

It's easy for an auditor to see the difference.

Seth

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"inky dink" <isisis[at]skl.not> wrote:
- quote -

You'd have to spend a lot of time and effort, and in the end probably
won't find one. I just spent time looking, and found none. The
closest I was able to find was one case that said that a series of
annual gifts, each just within the annual exclusion, is the limit of a
series of transactions to which the step transaction doctrine would not
apply.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote in message
news:Xns9A51594BEDAA8avocatstuyahoofr[at]130.133.1.4...
- quote -


yes, but I am wondering if there are cases which determined that their fact
situations were NOT like this suggested situation.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"inky dink" <isisis[at]skl.not> wrote:

- quote -

There certainly are. I haven't looked into this issue for several
years, but my recollection is that courts will generally use what they
call the "step transaction doctrine." Under it they simply look at
what happened in the beginning and at the end, and ignore everything
that happened in the middle.

In a case like this they would look at the fact that one person gifted
an amount of money in excess of the annual exclusion, and that another
person received those funds, and require incurring of gift tax.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -


I wonder if there are any court cases or IRS letter rulings that help to
clarify similar situations, by giving some example(s) of what sort of gift
sequences were not folded back into a single transaction.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Bill Brown <brownwp[at]longwood.edu> wrote:

- quote -

But good tax professionals will often take what they consider positions
for which there is reasonable legal justification, even if that is not
in agreement with the IRS position. Even the IRS does that, for
example when they lose in court but decide to "nonacquiesce" to the
court order.

That being said, they really have to have a reasonable justification
after sufficient research. In this case a lawyer saying something off
of his head is not sufficient, because he clearly has not read the
consistent line of cases that deal with this issue. I've seen lawyers
convicted of tax fraud for doing that kind of thing.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >