Quote:
Originally Posted by Lego05
It is not tax free (unless it isn't income in the first place, but I think everybody would agree that it seems likely that at least a lot of it is income).
And nobody said anything about wanting to perform this transaction in order to commit tax evasion. And I don't think that was the reason for the transaction. I don't think you should impute that motivation to the OP'er with absolutely no support for it. It is a pretty serious accusation.
In fact, making transfers like this is often directly related to evading taxes. The US government requires all transfers over a certain dollar amount to be reported (even among one's own accounts); other countries have similar requirements. Later, in the US, at least, there is a (usually fairly small) cap on the value of "gifts" (28K is in excess) - that is, if A transfers to B a quantity in excess of X then A has to pay taxes on the quantity as if it were income (although sometimes A can pass the obligation to B). These laws are motivated by preventing tax evasion, and by detecting movements of money generated by illegal activities (e.g. selling drugs or playing poker online). Gamblers tend to think of taxes as avoidable rake; the government sees gambling as politically defendable revenue (like cigarette taxes). In the situation described by the OP, there was some exchange, rather than merely a transfer, but I suspect that convincing the IRS of this, is not so simple - put another way - if what one receives of equal value for the transfer is not in and of itself legal - then one has problems with the tax man.
There follows a quote from the IRS web site:
(
http://www.irs.gov/businesses/small/...164872,00.html)
Quote:
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.
The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.