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If I give money back to a revocable Trust as a loan paid, will I or the benefactor still owe gift tax?

Los Angeles, CA |

My father wrote me a check from a Revocable Trust for a substantial amount of money. If I give the money back, will my father, or I, have to pay gift tax? Will the Trust be restored if the money is replaced within a few months of the transaction?

Attorney Answers 3

  1. Best answer

    Given that you are looking for a tax opinion, Im not sure anyone on this board will give you a direct answer. In addition, relying on something said from this board would not protect you if that opinion is wrong. If the gift was substantial, you dad has the funds to pay a tax or estate planning attorney for an opinion.

    With that said, when the gift was made, if it was complete, it was complete. Giving the money back could be treated as a gift from you to your dad.

    With all that said, why the need to repay? In addition to $14K annual exclusion, your father is entitled to an exemption of $5.25M for lifetime taxable gifts and transfers at death.

    So if you father has not used up the 5.25M exemption, there would be no gift tax due, but a gift tax return would need to be filed.

    In addition, unless the gift was conditioned as a "net gift" the gift tax, if any, is the obligation of the donor, your father.

    The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

  2. I don't understand your question. If you repay a loan, there is no tax. I suspect there are additional bad facts you do not mention. In that case, I would personally consult counsel, who can review all the facts with you, for advice. Good luck.

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  3. Attorneys Shultz and Daymude are correct. It is impossible to know the answer without reviewing the underlying documentation. Was this a gift from your father in which he filed a federal gift tax return? Was this a loan from your father, which is evidenced by a promissory note? Was there neither a gift tax return nor a promissory note? Whatever the case, your father should be retaining an experienced lawyer who can provide him with the necessary advice as to how to best handle this matter. Good luck to you.

    This information is presented as a public service. It should not be construed to be formal legal advice nor considered to be the formation of a lawyer/client relationship. I am licensed in Connecticut and New York and my answers are based upon the law in those jurisdictions. My answer to any specific question would likely be different if I were to review a client's file and have the opportunity to interview the client. Accordingly, I strongly urge you to retain an attorney in your jurisdiction with respect to any legal matter.

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