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Originally Posted by Bill14564
Definitely want to talk with a tax attorney about this.
Typically, the recipient of a gift does not pay tax. However, that doesn't mean tax is not owed. If the gift value is higher than the annual exclusion then tax will be owed and it is typically the donor who is required to pay.
Whether the $300,000 is given and the child pays the $65,000 or if the $65,000 is deducted first, the child will end up with $235,000 and the IRS with $65,000. At least that's the way I read the IRS information on gift taxes. On the other hand, I am not a tax attorney.
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Note that the annual exclusion only reduces your lifetime estate exclusion from the $13.61 million lifetime limit, and requires you to file a gift tax return with the IRS. It does not trigger any estate tax for you or the recipient until your gifting exceeds the lifetime limit. For example, if you give $100,000 to an individual this year, your lifetime estate limit of $13.61 million will be reduced by $82,000 ($100,000 minus $18,000), but you would owe no estate tax. The only reason to file the gift tax return is to document that the lifetime exclusion has been reduced.
Even if you have a billion dollars, you can give it all away while you are still alive as long as you give no more than $18,000 per year per recipient, and pay no estate tax. And, when you die, you will still have an estate tax exclusion of $13.61 million. After death, the $18,000 annual exclusion is no longer available, and the entire estate, less the exclusion, is taxed.