I'm in the US.
I have 2 different scenarios related to gifting of a property and I'm trying to understand why scenario 1 feels legal and scenario 2 feels illegal. I can't put my finger on the fundamental issue that makes the 2 scenarios different.
Scenario 1: My friend gifts me his house in exchange for a small amount of $ (less than market value). This scenario seems legal.
My friend ===> ownership ===> me My friend <=== $ <=== me
Scenario 2: My friend transfers ownership of his house in exchange for a small amount of $ (less than market value) and I gift my friend (or his minor children) another chunk of $ that he pockets tax-free.
My friend ===> ownership ===> me My friend <=== $ <=== me My friend/kids <=== tax-free $ gift <=== me
I feel like the difference is that in Scenario 1, there's a "winner" and a "loser." That is, there is a genuine cost borne by the the person who gives the gift and a genuine benefit by the receiver of the gift.
In scenario 2, there is no loser (except the government). But maybe there's more?