| This is a follow-up to my last Listen to Lawrence Letter from
April 24th, Volume 6 Issue 341.
READER QUESTION:
Good morning,
If the son happens to get audited, what would be required of him to prove it was a gift and not some miscellaneous or cash income? Thank you.
MY RESPONSE:
The core of this question is simply this: I stated that there is no income tax on the receipt of a gift…so how do we know it was really a gift? As a practical matter, this does not come up in the real world. However, assuming it did or you are worried about it, then it would help to:
1) have the donor file a gift tax return even if no tax is due or
2) have the donor send you written correspondence stating the date, amount, and the intent that it was to be a gift.
Also, next time have the donor put the word “gift” in the memo section of the check. In other words, this is all determined by the facts and circumstances of the case. The more it looks like a duck, sounds like a duck, and smells like a duck, it should be clear to the world that it is indeed a GIFT.
QUACK QUACK! |
