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My ex-husbands parents wrote us a letter in their Christmas card in 1988, stating they bought a bond for our son that will mature in 2008. They estimated that when it came to full term, (now), it would be about $15K -20K. This letter said the bond was intended as a Christmas present for his future. My question is this: Will he owe any taxes on this gift? One of the grandparents is deceased now, but the grandmother's attorney is mailing out our son's bond money that has reached maturity... Can anyone help explain?
I saw on these boards where California (where we reside) has no taxes for inheritances/gift, I suppose this could be considered either, I'm so confused! Thanks for any help on this one, we've waited 20 years for this money for his education and he needs all he can attain! Much appreciated!

Also if anyone has any ideas what he might do to with this money, since he does want to invest about 1/2 of it in something for future value. This is not my forte, so any ideas would be welcomed! :)

Please clarify something - back in 1988 did they buy the bond in your son's name and SS number? If so, then the gift was made in 1988, and the value of the gift would have been the amount of the investment at that time, which I estimate would have been less than $10K, so no gift taxes were due. However, income tax is due on the appreciation of the bond over the years. If you could tell us what kind of bond this was, we can be more specific - was it a savings bond, Original Issue Discount, Taxable or Tax-exempt, etc.

Thanks for such a speedy reply! The letter only states that "we bought a bond for our grandchild that will mature in 2008." I know that they probably paid a fraction of the bonds worth today, but since the grandmother is in a nursing facility, I doubt she would even remember which type. They were very frugal, so I would assume that they didn't pay a lot in 1988, and probably don't even have the originals. Sorry to be so vague, but we're not in contact.
The grandparent being in another state, and in a medical facility, I wish I knew "which type" of bond to better help you understand.

Generally speaking from my situation, what would you suggest? Thanks!

I suspect that a gift tax return will be needed, as this may be a "gift of a future interest". I doubt if any taxes are due on the gift tax return, but filing the return should be done as a soon as possible.

You need to get all the details of HOW the bond was titled, then go seek help from a local tax professional, either a CPA or an enrolled agent.

If bond bought in 1988 is in your ex-husbands name then it is a gift in 1988. At maturity of the bond, he must report all the interest as income.
If the bond is not in your ex-husband's name, then it is inheritance. The amount of inheritance is the original value of the bond plus the interest accrued on the date of death of his father. There is no tax on inheritance. On maturity, the interest after the date of death, is your ex-husband's taxable income.