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Yearly Gift Tax Reclassified by NTA
Posted: Sat Jul 13, 2024 3:02 pm
by Kadek Son
Has anyone had experience with this? I've seen a few laywer websites that suggest a gift contract be created in order to designate the gift amount, period and finality of the gift. Attempting to establish the gift as a single event with no future gifts planned. In addition, any regularity of gift giving should be avoided.
It appears that If you structure a single gift to spread it over several years it can get reclassified by the NTA as a single, taxable gift for the full amount. So, 1.1 million yearly gift for ten years can be reclassified as a 11million gift and taxed at that rate (40%).
Additional information would be appreciated.
Re: Yearly Gift Tax Reclassified by NTA
Posted: Sun Jul 14, 2024 2:29 am
by Tkydon
Kadek Son wrote: ↑Sat Jul 13, 2024 3:02 pm
It appears that If you structure a single gift to spread it over several years it can get reclassified by the NTA as a single, taxable gift for the full amount. So, 1.1 million yearly gift for ten years can be reclassified as a 11million gift and taxed at that rate (40%).
After deducting the 1.1 million yearly gift allowance of Y1.1M from the Y11M, and depending on whether the gift(s) was (were) from (a) Lineal Relative(s) (Parents, Grand Parents, etc.) or not, due to the rising marginal tax bands, the tax on 11M would work out to be:
Y2,070,000 or 20.91% on gifts from Lineal Relatives
or
Y2,710,000 or 27.37% on gifts from Unrelated Donors
and not 30% which is the marginal tax band for gifts from Lineal Relatives
nor 40% which is the marginal tax band for gifts from Unrelated Donors
Re: Yearly Gift Tax Reclassified by NTA
Posted: Tue Sep 10, 2024 3:51 am
by TokyoSurvivor
Kadek Son wrote: ↑Sat Jul 13, 2024 3:02 pm
Has anyone had experience with this? I've seen a few laywer websites that suggest a gift contract be created in order to designate the gift amount, period and finality of the gift. Attempting to establish the gift as a single event with no future gifts planned. In addition, any regularity of gift giving should be avoided.
It appears that If you structure a single gift to spread it over several years it can get reclassified by the NTA as a single, taxable gift for the full amount. So, 1.1 million yearly gift for ten years can be reclassified as a 11million gift and taxed at that rate (40%).
Additional information would be appreciated.
I would like to know more about this as affects tax planning. Do you have a link to the source I can read?