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Is a gift from parent to adult children taxable to children?

Ralph Lopez

in Student Loans

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Heather Maxwell on December 27, 2018

Not sure if it is a true gift. People often use the term "gift" to disguise some other type of payment that may be subject to taxes. For example, if you spend 40 hours a week digging ditch, and at the end of the week the person who told you to dig gives you a "gift," calling it a gift does not change the fact that it is a passive subject of wages. And you may have to pay tax if you have an appreciated gift of property. Let's say your parent bought stock for $1 a share some years ago and gives it to you. You pay no tax on the gift itself, but if the stock is now worth $100 per share, you will have to pay taxes on the $99 difference when you sell. Unfortunately, it does not work the other way around. If your father paid $100 for the stock, but it is a value of $1 on the day of the donation, and to sell immediately, you do not get a $99 deduction capital loss). There may be some cases in which the IRS can reclaim part of the donation. For example, if the gift was a fraudulent transfer to evade the payment of taxes or if the parent does not have enough assets remaining to pay any gift tax that may apply.


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