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anand0 · Apr 24, 2007, 10:23 AM

Hi,

This is my first question here. I have read many topics on this forum in the past and learnt quite a bit.

This is a very general tax related question. My girlfriend is moving out of the country (possibly temporarily). In the meanwhile she is keeping her bank account in the US open for various reasons (such as an expected tax refund). As per the bank's advice, she has made me a joint account holder on this account. Does the amount in the account therefore count as my income? Will it have any tax implications when I file next year?

Also, she may entirely transfer the account to me or otherwise transfer the contents of the account to mine. What happens in that case? Does that become my income? It would seem so, but I'm only asking because this would only be temporary. I would eventually be transferring her money back to her. I am very unclear about how this whole thing works. I'm not even sure if this is a meaningful question to ask.

Please advise.

AtlantaTaxExpert · Apr 24, 2007, 10:34 AM

The amount in the joint account does NOT count as income for you. Further, as long as her SSN/ITIN is listed as the primary account holder, the interest earned stays as HER income.

If she transfers the money to you, it is considered a GIFT. There are NO tax consequences for such gifts for YOU as the receiver. Further, if the amount given is under $12,000 for the entire year, there are no tax consequences for her as the giver.

anand0 · Apr 24, 2007, 07:05 PM

Thanks for the response David. So if the amount is greater than $12000, what kind of tax consequences does the giver face? It does not seem logical to me that the giver should pay any tax, so do you perhaps mean that the giver might avail of some deduction?

Besides, what sort of document would be needed to report or claim this gift come next tax year? Should she/I get such a document from the bank?

ebaines · Apr 25, 2007, 08:30 AM

There's a nice summary of gift tax on the IRS web site: see:
Gift Tax Questions

If your girl friend gifts more than $12K to you, then she is supposed to submit form 709 by April 15 of the year following the gift. The tax rate on gifts above the annual exclusion amount ranges from 18% to 46%, depending on the value of the gift.

As to whether it's logical or not - it's consistent that the donor pays taxes both on gifts and on the estate at the time of death, not the heirs (well actually, the deceased's estate pays the estate tax, but you get my point). I suspect that this is to preclude one's rich uncle from giving away his estate to his heirs while still alive in an attempt to avoid estate taxes. This way the IRS is sure to get its cut on the value of the property sooner or later.

Of course, the two of you could avoid all this if you simply got married!

AtlantaTaxExpert · Apr 25, 2007, 08:57 AM

Actually, most people do NOT pay gift taxes on gifts in excess of $12,000. They simply use part of their estate exemption, because gifts taxes and estate taxes are LINKED.

Ebaines note about getting married is valid, if somewhat judgmental.