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jarturosilva
New Member

If my retired mother gifts my brother a $10,000 disbursement from her 401K, and the 1099-R with this transaction has tax withheld, will she be the one paying taxes?

She proceeded with this $10,000 gift because she was told by another family member that neither she nor my brother would be taxed for this gift amount, and because the amount was less than $14,000 there wouldn't be a gift tax either. However, I suspect that this family member wasn't aware that my mother's retirement fund is in a 401K and not an IRA, so all the literature I've seen appears to note that disbursements have to be taxed regardless. I'm looking to seek clarity on the matter before proceeding. Thank you.

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Accepted Solutions
VolvoGirl
Level 15

If my retired mother gifts my brother a $10,000 disbursement from her 401K, and the 1099-R with this transaction has tax withheld, will she be the one paying taxes?

Sorry if it was a IRA or 401k withdrawal it is taxed as that.  Doesn't matter what she did with it.  How old is she?  If she is over 70 1/2 she could have her RMD go directly to a IRS qualified  and avoid the tax but your brother isn't a qualified charity.

But yes gifts given or received are not reported.  But that is after she takes it out of the retirement plan.

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2 Replies
VolvoGirl
Level 15

If my retired mother gifts my brother a $10,000 disbursement from her 401K, and the 1099-R with this transaction has tax withheld, will she be the one paying taxes?

Sorry if it was a IRA or 401k withdrawal it is taxed as that.  Doesn't matter what she did with it.  How old is she?  If she is over 70 1/2 she could have her RMD go directly to a IRS qualified  and avoid the tax but your brother isn't a qualified charity.

But yes gifts given or received are not reported.  But that is after she takes it out of the retirement plan.
jarturosilva
New Member

If my retired mother gifts my brother a $10,000 disbursement from her 401K, and the 1099-R with this transaction has tax withheld, will she be the one paying taxes?

Thank you for the response, I can move forward now! She is not over 70 years, so the other option would not be applicable in any event.
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