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My father received an inheritance from my late grandfathers estate, and he decided to gift me and my brothers an extremely generous check as a Christmas gift.

The amount of money is significant enough to give me pause regarding the tax implications of me depositing this check. I know that after a certain gift amount that you are legally required to report it as income on your taxes, however he said that this is not true in this case because he "had handled it on his taxes" but was being cryptic about what that actually means. I pressed for more information and he said not to worry about it because he consulted a tax attorney and they "figured it out".

I dont want to seem ungrateful and pry, I am truly floored by the extreme generousity and I realize this is a good problem to have. At the same time I want to make sure I dont break any rules and get penalized by the IRS.

Can the giver of a gift take ownership of the taxes on it? What is the maximum amount of a gift for that matter that can be given before needing to claim it as income?

I am in the US in the state of PA.

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    When you deposit the check doesn't matter. You've received the check and the check is good/valid/can be cashed. The date that you received the check (and could have deposited it or gone to the giver's bank to cash the valid check) is when you received the gift. Delaying the deposit of the check past when you could have had the money doesn't change the date of receipt, even if you choose not to deposit/obtain the money until a later date. If you're wanting to research this aspect, then you'll want to look for "constructive receipt".
    – Makyen
    Dec 26 '21 at 17:50
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    As a note, his "caginess" may be because even he doesn't understand the tax laws as were told to him. If he has a tax attorney/CPA looking at it and advising him on how it would work, it could just be that they have it well in hand even without his understanding.
    – Anoplexian
    Dec 27 '21 at 17:31
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In the US, gifts are not taxable income for the recipient. The giver may owe taxes, or at least be required to file tax forms, if the gift exceeds $15,000 in 2021 ($16,000 in 2022). Note that this is a person-to-person limit, so if (for example) both the giver and the recipient are married, the giver (and spouse) can give a combined $60,000 to the recipient (and spouse) before gift and inheritence tax paperwork would be required.

IRS FAQ on gift taxes

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As user4556274 (+1 to him) says, gifts are not taxable income to the recipient. Assuming the gift was given in 2021 and exceeds $15,000, the OP's father needs to file Form 709 to report the gift. This Form is not filed as an attachment to the Federal tax return (Form 1040) but is sent separately to a specific IRS office as per the Form 709 instructions (Kansas City, MO for 2021 forms). The deadline for filing this Form for 2021 is April 15, 2022.

On the Form 709, the donor has the option of either computing and paying the gift tax due, or choosing to have it charged off against the Combined Lifetime Gift and Estate Tax Exclusion which is currently over $5M. This will reduce the amount of exclusion available for future gifts and for the donor's estate when the donor passes away. If such a reduction is of concern to the OP's father because he expects his estate to be larger, he has an attorney to advise him on alternatives. I would suggest that the OP ask his father for a copy of the Form 709 that he will file to keep for the OP's own records. If the IRS ever audits the OP and wants to know where the large amount of money came from and how come it wasn't reported as income to the recipient, the OP has a copy of the Form 709 to back up the answer that it was a gift. Alternatively, the OP can ask his father to create a paper trail by sending the OP a letter like "Dear son, I wish to gift you $xxx, Love, Dad" and the OP responding "Dear Dad, Thank you for the gift of $xxx, Love, Your son" which records formally the giving as well as the acceptance of the gift, and leaves the question of whether or not to file Form 709 a matter between the OP's father, father's attorney, the IRS, and God.

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  • This is great news! Thank you for the answer. I will ask for a copy of the 709 form for my records. Thank you! Dec 25 '21 at 19:51
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    @maple_shaft Please reconsider. You have absolutely no need for your father's form 709 under any circumstances. The gift has no tax implications for you, period. Asking for the 709 might be a bit insulting to your father, as if you don't trust him to follow tax law on his own personal taxes. This is not your business, and after such a magnificent gift, why risk insulting your father?
    – MTA
    Dec 26 '21 at 14:15
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    @davidbak Yes, Connecticut and Minnesota have a gift tax as part of their estate tax law. Like the Federal gift tax, the donor is taxed, not the recipient.
    – MTA
    Dec 26 '21 at 21:43
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    @MTA - What should the recipient do if they do get audited and asked about the sudden large sum of money? "It was a gift" seems very dubious as an acceptable claim. Unless the IRS's procedure at that point is to find out from whom and go look up their tax form? I could see that as a possibility.
    – Bobson
    Dec 27 '21 at 20:15
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    @Bobson - Dilip Sarwate (above) has an excellent suggestion, the "Dear Son" letter. The OP can also save a copy of the gift check written by his father. Gifts between family members are not an automatic red flag in an audit. So-called "gifts" from an employer, a client, anyone with an established business relationship or a complete stranger are the dubious "gifts" that an auditor would focus on.
    – MTA
    Dec 27 '21 at 23:11
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While OP specifies a US location I thought an answer for the same question in a different jurisdiction could be useful and interesting as well.

German tax law treats a gift essentially the same way as an inheritance. Everything below a certain threshold is tax free, above an inheritance tax applies. The threshold is a few hundred thousands Euros for spouses and children, a few thousand for random strangers and somewhere in between for other relatives. The total threshold is applied cumulatively over the last 10 years whenever a gift/ inheritance is made.

In summary, in OPs situation you may owe inheritance tax but as the gift is from OPs father that would only apply for extremely large gifts. Additionally if you receive another gift from your father within the next 10 years or he happens to pass away and you receive an inheritance from him, the tax implications then would also include the current gift.

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