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Ian27
New Member

If grandfather gifts $14000 each to son, son's wife and grandkid, can the grandkid immediately gift the money to the parents? Is this an endaround of the $14,000 limit?

 
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Hal_Al
Level 15

If grandfather gifts $14000 each to son, son's wife and grandkid, can the grandkid immediately gift the money to the parents? Is this an endaround of the $14,000 limit?

No. It's clearly not a bona-fide gift to the grandchild.

"Gift Tax" is somewhat of a misnomer.  Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
See 
https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/... 

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4 Replies
Hal_Al
Level 15

If grandfather gifts $14000 each to son, son's wife and grandkid, can the grandkid immediately gift the money to the parents? Is this an endaround of the $14,000 limit?

No. It's clearly not a bona-fide gift to the grandchild.

"Gift Tax" is somewhat of a misnomer.  Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
See 
https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/... 

Ian27
New Member

If grandfather gifts $14000 each to son, son's wife and grandkid, can the grandkid immediately gift the money to the parents? Is this an endaround of the $14,000 limit?

Thanks Hal_Al.  I want to add that the dad will be paying college tuition out of a 529 plan that he set up, and the money that the kid will gift to the parents is matched to the money that the dad will pay in tuition.  Is this still not a bona-fide gift?  It would have been simpler to have the granddad give straight in to the 529 account, but due to a scholarship, there is already more money in the 529 account than will be used for college expenses.
Hal_Al
Level 15

If grandfather gifts $14000 each to son, son's wife and grandkid, can the grandkid immediately gift the money to the parents? Is this an endaround of the $14,000 limit?

Similar but not the same. You have identified a solution. Have grandfather contribute to the kid's 529 plan. The father can take the money out for his own use (he's the owner, the kid is only the beneficiary). That can get complicated, as the funds are commingled with previous contributions and earnings.

But filing a gift tax return is no big deal, unless you expect to have an estate exceeding $11,200,000

If grandfather gifts $14000 each to son, son's wife and grandkid, can the grandkid immediately gift the money to the parents? Is this an endaround of the $14,000 limit?

The grandchild can do anything he wants to with his gift, including giving it to he parents (or buying a car), but that has to be solely on his own volition and not a condition of the gift.   Gifts cannot have conditions or strings attached or it is not really a gift but an avoidance of the gift reporting laws.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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