[SHIBUMI]

there is an imputed interest rate that can be used and it is less than 2%...........

Originally Posted by CoachKandSportsguy

Everything financial accrues to the state, even assets not received yet, but are owed. . including inheritance not yet received nor dispersed.

In the above case, the estate could be distributed that way, however, the actual execution would be beyond the decedents control, or wishes, so the final result could be iffy. . . Likewise, there would be minimal income tax / capital gains tax, on the sale of stocks by the beneficiaries, so the only potential tax would be any state gift tax, depending upon the location of the beneficiary, paid by the beneficiary after distribution. . needs to be recalculated and then removed from the distribution amount

One way to get around state gift taxes, is to loan money to a beneficiary, at zero interest rate, and due the estate upon death. The loan would be included in the estate value, but the trust or will would state that all loans are forgiven. . thereby giving the money prior to death, not having income for taxation, and not requiring a repayment.

OK, let's brain storm one more devious tax avoidance scheme. .

[Pugchief]

Originally Posted by SHIBUMI

there is an imputed interest rate that can be used and it is less than 2%...........

Um, no it isn't.

The IRS minimum interest rates, known as Applicable Federal Rates (AFRs), are published monthly and vary based on the term of the loan: short-term (up to 3 years), mid-term (3 to 9 years), and long-term (over 9 years). For August 2025, the rates are 4.03% for short-term, 4.06% for mid-term, and 4.82% for long-term loans.
resources.evans-legal.com nationalfamilymortgage.com

[dewilson58]

Originally Posted by Haggar

This doesn't work for so many reasons.

The IRS considered loans to be forgiven at death a gift.
The IRS also states that if a loan is given at less than the prevailing rate interest is to be imputed and that interest is considered a gift. This amount should included in the lender's taxable income.

If the IRS knows about the forgiven at death and considers a gift, the exemption is huge.

If the loan is given below prevailing rates, the gap can be part of an annual exemption.

[SHIBUMI]

4 years ago I got one for 2%.........have not kept up..thanks

Originally Posted by Pugchief

Um, no it isn't.

The IRS minimum interest rates, known as Applicable Federal Rates (AFRs), are published monthly and vary based on the term of the loan: short-term (up to 3 years), mid-term (3 to 9 years), and long-term (over 9 years). For August 2025, the rates are 4.03% for short-term, 4.06% for mid-term, and 4.82% for long-term loans.
resources.evans-legal.com nationalfamilymortgage.com

[dewilson58]

Originally Posted by SHIBUMI

Federal Gift Tax exemption is 19,000$. to as many people as you want
don't see how you can gift more than that to granny without it being taxed

dont see how you get around that?????????????

$19k in December, $19k in January the following year.

[Pugchief]

Originally Posted by SHIBUMI

4 years ago I got one for 2%.........have not kept up..thanks

Then it was probably illegal. Rates were even higher 2 years ago.

Applicable Federal Rates | Internal Revenue Service

[JMintzer]

Originally Posted by OrangeBlossomBaby

Another option: stop trying to avoid paying taxes. If you don't, you're contributing to the burden put on future generations (your kids, grandkids, THEIR kids and grandkids) to pay for the loss.

Be a contributing member of society and pay your taxes.

Um... Seems to me that they are actually doing what you propose. Gifting money to THEIR kid... Lessening his burden...

[JMintzer]

Originally Posted by Stu from NYC

Unfortunately many people do not understand govt spending is very inefficient in so many ways. Let us not forget the $ 600 toilet.

$600 hammer...

[SHIBUMI]

4 years ago 1.75 imputed interest rate.......I was lucky

normal rates 3%

Originally Posted by Pugchief

Then it was probably illegal. Rates were even higher 2 years ago.

Applicable Federal Rates | Internal Revenue Service

[Haggar]

Originally Posted by BumpaOompa

I believe once the father transfers the stock to the Grandmother it creates a taxable event and the father gets whacked for the capital gains. If it sounds too good to be true it probably is.

Let's understand how this works. Each person may give another person up to $19,000 without having to file a gift tax return. If one person gives another person more than $19,000 a gift tax return needs to be filed informing the IRS that they are using their part of their lifetime exemption. No taxable event - but a reporting requirement. If it's not reported on the gift tax return then the gift will have tax consequence. The giver pays the gift tax - not the recipient.

If stock is given receiver will pay tax only when stock is sold using the donor's basis. No taxable event when the stock is given.

You can have a husband and wife each give $19,000 to both their child and his wife and have no requirement to file a return. A way for a couple to gift $76,000 a year. I've had a taxpayer and his wife lend their son and his wife $300,000 to buy a house, charge interest on the balance t each year (taxable) and write off $75,000 of loan over 4 years - no reporting requirement/

[CoachKandSportsguy]

Originally Posted by Haggar

I've had a taxpayer and his wife lend their son and his wife $300,000 to buy a house, charge interest on the balance t each year (taxable) and write off $75,000 of loan over 4 years - no reporting requirement/

So the cost to the taxpayer for the loan was small in the grand scheme. .

Principal: $300,000
Interest rate: 3%

Annual payment assuming 30 year term: $15,306
Year 1 and max interest = 9,000

Married filing jointly, taxable income assumption: $206,701 to $394,600
incremental tax rate: 24%

Cost in taxes = year 1, $2,160
Total taxes over 4 years: $8,362 at full annual payments.

So to loan a child $300,000 to avoid gift tax of a state and estate, if that is the goal,
then the cost of a 200k-400K salaried couple is $2K per year in taxes on the loan income, or 1% of their taxable income.

Seems very tax efficient to me, to even avoid the estate gift tax or other tax liabilities. .

but that is me at that level of income. .

Many thanks again to the tax expert Haggar

[retiredguy123]

Originally Posted by SHIBUMI

Federal Gift Tax exemption is 19,000$. to as many people as you want
don't see how you can gift more than that to granny without it being taxed

dont see how you get around that?????????????

See Post No. 9. There is no Federal "gift" tax. The only tax is a "unified gift and estate tax" that has a lifetime exemption of $13.99 million. As long as you do not exceed this amount, you do not owe any tax. The $19,000 is an annual exemption for gifts, but you do not owe any tax until you exceed $13.99 million. So, if you gift $30,000 to one individual in a single year, all it means is that you have reduced the lifetime exemption by $11,000. But, you do not owe any tax until you have exceeded the lifetime exemption of $13.99 million.

[OrangeBlossomBaby]

Originally Posted by manaboutown

Judge Learned Hand's quote
In the 1934 case Helvering v. Gregory, Judge Hand wrote the following for the U.S. Court of Appeals for the Second Circuit:
Judge Hand stated that individuals may arrange their financial affairs to minimize their taxes and are not obligated to choose a structure that would benefit the Treasury more, nor do they have a patriotic duty to increase their taxes. He noted that courts have consistently affirmed there is nothing improper in arranging affairs to keep taxes low, as everyone does it and is right to do so because no one owes a public duty to pay more than legally required, viewing taxes as enforced payments rather than voluntary contributions.

Keeping taxes low is not the same as avoiding paying taxes. If you are avoiding paying them, it means you're going out of your way to not pay any at all. Sure, take deductions, go for it. But at the end of the day, if you are earning millions of dollars, and not paying any taxes, then you are hurting everyone in lower tax brackets who don't earn enough to take those deductions and have to pay for YOUR roads, sewers, police and fire service, schools, traffic lights, stop signs, etc. etc. etc.

Pay your taxes. And legislate a minimum tax pre-deduction for the wealthy, to ensure that they - pay their taxes.

[OrangeBlossomBaby]

Originally Posted by Ken D.

Hmm, let me guess what tax bracket you're in.

I'm in a tax bracket that has to take the standard deduction, is unable to itemize, and has to pay taxes.

[manaboutown]

Originally Posted by OrangeBlossomBaby

Keeping taxes low is not the same as avoiding paying taxes. If you are avoiding paying them, it means you're going out of your way to not pay any at all. Sure, take deductions, go for it. But at the end of the day, if you are earning millions of dollars, and not paying any taxes, then you are hurting everyone in lower tax brackets who don't earn enough to take those deductions and have to pay for YOUR roads, sewers, police and fire service, schools, traffic lights, stop signs, etc. etc. etc.

Pay your taxes. And legislate a minimum tax pre-deduction for the wealthy, to ensure that they - pay their taxes.

Tax burden distribution for 2022

Data from the IRS and analysis by organizations like the Tax Foundation show how the federal individual income tax burden is divided among different income groups.
Top 10%: Paid 72% of federal income taxes.
Top 5%: Paid 61% of federal income taxes.
Top 1%: Paid 40.4% of federal income taxes.
Top 50%: Paid 97% of federal income taxes.
Bottom 50%: Paid the remaining 3% of federal income taxes.