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LegalGround >> Tax Question Help (please)


3/15/08 7:40 PM
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Yossarian
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Edited: 15-Mar-08
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Say you had relatives overseas (Europe) who wanted to wire you some money. Would I have to pay income tax on this here in the US? How is this handled?
3/15/08 7:40 PM
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Yossarian
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Edited: 15-Mar-08
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And if nobody has an answer, if there is a website or forum that handles this sort of thing better, I'd appreciate a link Thanks.
3/16/08 3:38 PM
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Yossarian
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Edited: 16-Mar-08
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Matbattle links on subforums.... Well played, sir. TTT for some help here.
3/16/08 11:45 PM
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pluxor
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Edited: 16-Mar-08
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don't have to pay income tax on gifts or loans.
3/17/08 10:35 AM
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seg
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Edited: 17-Mar-08
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Pluxor is correct; the IRS realizes that the illegal U.S. income tax cannot be applied to overseas transactions without causing an international incident.

However, you will likely be hounded by the Feds as a terrorist due to the Patriot Act.

3/17/08 4:29 PM
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ViewType
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Edited: 17-Mar-08
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This is an interesting way to pay for hookers. I salute you.
3/23/08 2:01 PM
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Mencken
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Edited: 23-Mar-08
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Call WU and ask them if they have a reporting policy. I suspect it is based on a $ amount (e.g. transactions over $10,000) just to avoid criminal transactions. I know generally gifts in a family are not considered income, but I can't recall if there's a dollar limit on this as well
3/23/08 5:05 PM
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Fake Pie
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Edited: 23-Mar-08
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"I know generally gifts in a family are not considered income, but I can't recall if there's a dollar limit on this as well" I believe it is 12000 dollars right now.
3/23/08 5:16 PM
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Yossarian
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Edited: 23-Mar-08
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What if it's a lot more than $12,000?
3/23/08 5:32 PM
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Fake Pie
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Edited: 23-Mar-08
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Then it is income that you have to pay taxes on. But I don't know what the effect of it coming from outside the country is. Isn't that the whole S861 thing? Steve know, I don't. You can try to make sense of this and see if it would fall under any part of this section: http://www.fourmilab.ch/uscode/26usc/www/t26-A-1-N-I-861.html
3/24/08 11:46 AM
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Steve72
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Edited: 24-Mar-08 11:52 AM
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The following is general advice. Based on your last post, this is a substantial sum, and you should probably contact a tax advisor ASAP to see if there is a way this transfer can be structured to minimize the hit. Advice on an MMA web board, even one called the legalGround, is worth what you pay for it. The gift tax is applied on the transfer itself, regardless of where the transferror is located. Therefore, if this transfer is, in fact, a gift (and not a loan), taxes would generally be owed under IRC §2501.
3/24/08 4:58 PM
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Fake Pie
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Edited: 24-Mar-08
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Thanks Steve.
4/2/08 8:03 PM
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Croft
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Edited: Apr 2 2008 12:00A
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Gift tax is paid by the giver of the gift. There is no tax due for gifts given totaling less than $12,000.00 for an individual or $24,000.00 for a married/joint couple in any one tax year. Thus if you are being given a gift, you need not pay taxes on it. (Note that there are exceptions - your employer cannot give you a gift without it being declared as income; note also that money given for medical expenses does not count towards the gift total.)

HOWEVER, if this is a large sum of money, be prepared for the IRS to ask questions. Their curiosity is directly proportional to the amount of the gift given. As Steve said, if this is a large sum of money then you should run the details past a tax pro.

Finally, www.irs.gov is actually a very good site for basic info. But again, if you are talking mid to upper five figures, spend the $$$ on a tax lawyer.
4/2/08 10:33 PM
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Fake Pie
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Edited: Apr 2 2008 12:00A
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"Thus if you are being given a gift, you need not pay taxes on it."

I don't think that is right. The gift tax is paid by the transferor but the transferee will have to pay income taxes if it is above 12K, no?

I know a lawyer trying to structure her parents paying off her loans and she can't do it all in one chunk because it would be income to her. At least that was my understanding. Sorry if I am incorrect.
4/3/08 5:57 PM
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Croft
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Edited: Apr 3 2008 12:00A
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Gifts you receive aren't considered income. It doesn't matter how large they are. You don't report them on your income tax return in any way.

See IRC Sec.102 at: http://www.law.cornell.edu/uscode/26/102.html

Income Tax. Distinction between Gift and Compensation
The University of Chicago Law Review, Vol. 5, No. 3 (Apr., 1938), pp. 510-512

http://www.fairmark.com/begin/gifts.htm

Also, no gift tax is owed by your friend's parents for the payment of her student loans even if they exceed the cap:

http://law.freeadvice.com/tax_law/gift_tax_law/pay_medical_expenses_tax.htm
4/3/08 7:10 PM
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jbapk
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Edited: Apr 3 2008 12:00A
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"I know a lawyer trying to structure her parents paying off her loans and she can't do it all in one chunk because it would be income to her. At least that was my understanding. Sorry if I am incorrect."

They might be forgiveness of debt income?
4/3/08 10:49 PM
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Fake Pie
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Edited: Apr 3 2008 12:00A
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"They might be forgiveness of debt income?"

That is what it was. Sorry for being stupid.

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