Hypothetical Tax Question

[IQ89]

Say you have four people (assigned as A, B, C, & D.) Person A gives person B a million dollars, and B pays whatever taxes are due (would that be considered a gift tax?). Then B gives C the balance and he too then pays taxes. Then C gives the balance to D, then D back to A. Round and round. Would it be possible for the government to end up with the whole beginning amount of a million dollars (or close to it)?

[keikiwai]

SIIHP IT!

[trapsetter]

[ QUOTE ]
Say you have four people (assigned as A, B, C, & D.) Person A gives person B a million dollars, and B pays whatever taxes are due (would that be considered a gift tax?). Then B gives C the balance and he too then pays taxes. Then C gives the balance to D, then D back to A. Round and round. Would it be possible for the government to end up with the whole beginning amount of a million dollars (or close to it)?

[/ QUOTE ]

The government is entitled to gift taxes on any gift in excess of a certain amount. I'm not certain, but i think the amount is $14,000. It used to be $10,000, but it has gone up under Bush.

So to answer your question, they'd be able to tax these successive gives until it got chisled down to that number.

[djoyce003]

yeah basically, until you hit the gift tax limit. There are other things you can do, like if you are married, you can give someone the limit, and so can your wife, and that counts as two separate gifts and they are each tax-free up to the limit.

If they are married, you and your wife can give each one of them the limit, effectively giving them 4x the max tax-free gift (if it's 14k, it would be 14k * 4).

[kibble420]

[ QUOTE ]
Say you have four people (assigned as A, B, C, & D.) Person A gives person B a million dollars, and B pays whatever taxes are due (would that be considered a gift tax?). Then B gives C the balance and he too then pays taxes. Then C gives the balance to D, then D back to A. Round and round. Would it be possible for the government to end up with the whole beginning amount of a million dollars (or close to it)?

[/ QUOTE ]

In the poker game of life, the government is the rake.

[The DaveR]

x * (1-y)^n = 0

Is this equation possible where y is less than one and n is greater than one and x is nonzero?

[Thremp]

No.

[Rockatansky]

1) Yearly exemption is currently $12K per donee.

2) Current unified credit amount is $2 million, I think. Thus, each person could gift up to that amount (assuming no prior gifts, and after taking the yearly exemption into account) before any gift tax liability arises.

[JPinAZ]

Also, the gift tax is paid by the person GIVING the gift, not the person receiving it.