# Can a sibling give charitably to another sibling without having to pay taxes on it?



## CDM (Aug 23, 2006)

I am aware that parents can give money (under $10,000/year) to their children and not have to pay taxes on it. (BTW, does the child have to report it as earned income?)

What about Aunts/Uncles/Grandparents?

What about brothers/sisters?

As I start Seminary next week, I am trying to find a way that my brothers, aunts & uncles can avoid paying the taxes if they choose to give.

What is the best way to set up a "seminary fund" that family members and friends can contribute to without being double taxed on it? 

Apparently, it is not legal if a family member gives to the recepient's Church and the Church turns around and gives it to the member.

Does anyone know the legal ins and outs about this junk?

[Edited on 8-23-2006 by mangum]

[Edited on 8-23-2006 by mangum]


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## Puritanhead (Aug 23, 2006)

*Tuition gifts are exempt up to $10k*

Ask Vic Bottomly. He is pursuing a degree in tax law.

Incidentally, I did tax prep and read through some of the JK Lasser's books. I have good reason to believe that any gift you receive from anyone towards tuition for college is exempt. I know parents are exempt. I believe the exempt amount goes up to $10,000 now, as Fred stated. It was raised not too long ago by statutory change in the U.S. code.

Just call the IRS tax question line and ask 1-800-829-1040. Since their rules are so complicated, they have people to help assist and make getting fleeced by the U.S. government more easy. Call now! Operators are standing by.


[Edited on 8-23-2006 by Puritanhead]


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## fredtgreco (Aug 23, 2006)

I believe the limit of $10,000 applies to anyone. So there can be combinations: for example, you could give $10,000 to your sister, another $10,000 to her husband, and $10,000 to each child without having to pay gift taxes.


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## fredtgreco (Aug 23, 2006)

> _Originally posted by mangum_
> I am aware that parents can give money (under $10,000/year) to their children and not have to pay taxes on it. (BTW, does the child have to report it as earned income?)
> 
> What about Aunts/Uncles/Grandparents?
> ...



I read this more carefully just now.

Send me an email with the name of teh school you are going to, and I can give you good advice here.


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## CDM (Aug 23, 2006)

> _Originally posted by fredtgreco_
> I believe the limit of $10,000 applies to anyone. So there can be combinations: for example, you could give $10,000 to your sister, another $10,000 to her husband, and $10,000 to each child without having to pay gift taxes.



So, say my Uncle gives $10,000 to me for Seminary this year. He could write it off at the end of the year? 

Then, would I have to report this as earned income (and then have to pay taxes on it) at the end of the year?





> _Originally posted by fredtgreco_
> 
> 
> > _Originally posted by mangum_
> ...





[Edited on 8-23-2006 by mangum]


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## Puritanhead (Aug 23, 2006)

Official IRS statements on gifts


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## ChristopherPaul (Aug 23, 2006)

Mr. Mangum, do you trust your wife?

Because if you do trust her, there's no reason you can't keep that thirty-five thousand...If you want to keep all that money, give it to your wife. The IRS allows a one-time only gift to your spouse for up to sixty thousand dollars...tax-free...you do need someone to set up the tax-free gift for ya, and it'll cost ya, a lawyer for example...I suppose I could set it up for ya. That would save you some money. You get the forms, I'll prepare them for ya, nearly free of charge. 


All I ask is three beers apiece for each of my co-puritans...I think a man typing on the boards feels more like a man if he can have a bottle of suds. That's only my opinion.


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## VirginiaHuguenot (Aug 23, 2006)

_The Shawshank Redemption_


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## CDM (Aug 23, 2006)

> _Originally posted by ChristopherPaul_
> Mr. Mangum, do you trust your wife?
> 
> Because if you do trust her, there's no reason you can't keep that thirty-five thousand...If you want to keep all that money, give it to your wife. The IRS allows a one-time only gift to your spouse for up to sixty thousand dollars...tax-free...you do need someone to set up the tax-free gift for ya, and it'll cost ya, a lawyer for example...I suppose I could set it up for ya. That would save you some money. You get the forms, I'll prepare them for ya, nearly free of charge.
> ...





I am hearing that tuition is exempt. Does "exempt" mean neither party (giver or receiver) pays taxes on the donation?


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## ChristopherPaul (Aug 23, 2006)

> _Originally posted by VirginiaHuguenot_
> _The Shawshank Redemption_



For quick draw McHuguenot:


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## Puritanhead (Aug 23, 2006)

> _Originally posted by VirginiaHuguenot_
> _The Shawshank Redemption_


 Now, what does a story about a guy who digs for twenty years through a concrete wall and escapes prison after a wrongful conviction have to do with IRS tax rules regarding gifts? 

Speaking of which, I would try to convince the warden and the guards to give the prisoners beer.


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## Ambrose (Aug 23, 2006)

The gift exemption is now $12,000 (as of 2006). Gifts are NEVER taxable to the recipient unless the recipient agrees to pay the taxes. The only tax on gifts is on the giver for gifts to any person in excess of the $12,000 per year. 

So grandma and grandpa could give you and your spouse 12,000 each for a total of 48000 each year without any tax consequences. 

I'm not going to address some of the sillier ideas in this thread unless you really want me to, but this is really not very complicated.

The gifts can be to relatives or complete strangers, so the sibling part is irrelevant. 

[Edited on 8-23-2006 by Chad Degenhart]


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## Croghanite (Aug 23, 2006)

> _Originally posted by Chad Degenhart_
> The gift exemption is now $12,000 (as of 2006). Gifts are NEVER taxable to the recipient unless the recipient agrees to pay the taxes. The only tax on gifts is on the giver for gifts to any person in excess of the $12,000 per year.
> 
> So grandma and grandpa could give you and your spouse 12,000 each for a total of 48000 each year without any tax consequences.
> ...



What about the fact that I want to give a gift to my brother from my corporation? Does the gift have to only be towards school or can it be just a gift for no reason? Can I give my sibling a $10,000 gift from my corporation and have it be a deduction or does it have to be from me personally?


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## Ambrose (Aug 23, 2006)

> _Originally posted by mangum_What is the best way to set up a "seminary fund" that family members and friends can contribute to without being double taxed on it?
> 
> Apparently, it is not legal if a family member gives to the recepient's Church and the Church turns around and gives it to the member.
> 
> ...



You don't need to do a "fund", just have them give you gifts. 

The reason you wouldn't route it through the church is because donations to churches are often deducted by the donor, so you can't use a tax-exempt charitable religious organization worms as a front for private fund-raising.


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## Ambrose (Aug 23, 2006)

> _Originally posted by LAYMAN JOE_
> 
> 
> > _Originally posted by Chad Degenhart_
> ...



It has to be from an individual, not a corporation. A corporation can make charitable contributions to the school and deduct them, but there can be no strings attached (such as to be used for your brother's benefit). 

Basically the IRS will not let you escape paying income taxes on the money you give to your brother, so you have to take it in income, then give it as a gift. 

But the personal gifts do not have to be for any reason at all.


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## Croghanite (Aug 23, 2006)

Just to clarify... I can personally give my brother $10,000 for no reason and that would be a personal deduction from my earned income? 
So my corporation can pay me (and show that as a loss), I then can give that to my brother as a gift and deduct that from my earned income. That way the money does not get taxed. The money is shown as a loss for my corp and me personally.


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## Ambrose (Aug 23, 2006)

> _Originally posted by LAYMAN JOE_
> Just to clarify... I can personally give my brother $10,000 for no reason and that would be a personal deduction from my earned income?
> So my corporation can pay me (and show that as a loss), I then can give that to my brother as a gift and deduct that from my earned income. That way the money does not get taxed. The money is shown as a loss for my corp and me personally.



No you could not deduct the gift from your taxes. But the gift itself is not taxable. 

What kind of corporation are you talking about? Subchapter S?


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## Croghanite (Aug 23, 2006)

Close corporation


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## fredtgreco (Aug 23, 2006)

> _Originally posted by LAYMAN JOE_
> Close corporation



Joe,

If the corporation is a pass through entity (Sub Chapter S, or an LLC) you should not be paying "double taxes." The corporation should really not even exist for tax purposes; you should be filing your income on a Schedule C. If you do not have a pass through entity (i.e. you are earning corporate income, paying corporate taxes, and then dividending out the income and paying personal taxes on the dividends) you need to change your corporate structure.

The easiest (by far) is an LLC, but an S corp works fine as well. There are also many states that will allow a Limited Partnership with only one partner (I know, it is crazy).

So the bottom line is:

You can give the money. You give the money from your personal funds, not corporate funds. You cannot deduct the money you give from your income. But you should not have to pay double taxes.


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