O/T Brothers tax problem

My brother hasen't had any income for a long time. He has been living on money from selling his cattle business, about 15 years ago. Along with that he hasen't filed taxes for about that many years, since he hasen't worked. Now he needs money to repair the family home he lives in by himself, since Mother died. I got him a check for over 10,000.00 out of the family trust,to put in his checking account to complete the repairs. Now he is worried anything over that amount will trigger the IRS. I told him that's not my problem. Will in fact, that amount show a red flag to the IRS, to come calling? Stan

Banks are required to report CASH deposits of $10,000 or more.........

Banks are required to report transactions over $10,000, deposits and withdrawals, transfers etc. This intrusion in your privacy is one of the many examples of loss of individual rights that have occurred as a result of the so called ''war on drugs''. Just because the transaction is reported does not mean it will be followed up on. If your brother has not had any verifiable income he doesn't have any problem with the IRS, even if they come calling he can file zero returns for those previous years penalty free because he does not owe anything.

Chief, I think I'm right on this, but you can give anyone a gift up to $11,000 and not be taxed. It used to be just imediate close family could gift to each other up to $10,000 tax free but that was changed. Someone please chime in if I'm wrong on this. I don't know if a return has to be filed or not, even though it's not taxable. Does the trust have to report this expenditure to the IRS? Jim

Yes, CASH is the key word.. Intent of that rule is to hinder money laundering...

Yes, it will be reported to the IRS. Whether or not it is taxable income depends on whether or not it is considered a gift, inheritance or regular income. But it is not your problem to solve his dealings with the IRS. If it looks like he is spending more money than he has reported as income, an audit may be coming.

I would've given him two checks a few days apart to keep it under $10000.00. Hal

If he had enough money from the sale of his cattle operation to live on for the past 15 years and put that money in any type of bank, CD or what ever he has had reported income every year. Even if it didn't go over the amount that is exempt it still generates a W-2. Other than hiding the the money around the house they already know he has income and it is just a matter of time and luck on if and when he gets audited. Don't get me wrong I don't want to pay anymore in taxes than I have to but it is the law, even if we don't like it.
Angle Iron

Someone please chime in if I"m wrong on this.

For 2010 the amount is $13,000.

Tim

Hello 37 chief,
If that is the ONLY taxable income NO PROBLEM.
You can have a taxable income of at least $18.000
and still not have to file. It goes up every year,poverty level, so check the IRS site for the right amount. If he needs to file, let him go to the IRS office, he should qualify for a free retun filing.
Guido.

If he has to borrow 10K for the repairs, I would be concerned that he isn't going to do the repairs, just live off the money a bit longer.

My wife just tried to transfer $10,000 from her savings account to her checking account. Before she confirmed the transaction there was a warning that the transaction would be reported to the IRS because the transaction was $10,000 or more. She changed the amount to $9500 and no warning. It would appear that any transaction of $10,000 could be reported.

You write---" Now he needs money to repair the family home he lives in by himself, since Mother died. I got him a check for over 10,000.00 out of the family trust,to put in his checking account to complete the repairs."

Does the trust own the family home? Is the $10,000 of repairs considered an upkeep cost? Is your brother doing the repairing or just lining up the contractors and paying them for the work? Are you the trustee?

The "trust account" files a tax return each year.

Principal distributions from trusts are not taxable to the beneficiaries.

However, income (dividend, interest, gains, earned income) distributions are taxable, to the extent they exceed expenses and losses of the trust, since they were earned on the principal of the trust after the death of the trustor. Income may be taxable to the trust or taxable to each individual beneficiary, and sometimes a beneficiary will have to report income even though it was not actually received. Conversely, it could be that after expenses and losses, the trust will have losses that may be allocable to each beneficiary.

It is the responsibility of the trustee of the trust to file IRS Form Schedule K-1 for each beneficiary of the trust, showing reportable income, gains, and losses from the trust that are allocated to each beneficiary. The trustee must also send a copy of this Schedule K-1 to each beneficiary.

In addition, your state likely has a state form Schedule K-1 that also must be filed.

You can go the the IRS web site and find the relevant publications or talk to a tax preparer, or even better talk to the trustee (the trustee is liable for the accuracy of the K-1).

NOTE: I an not an accountant, but work closely with owners, beneficiaries, and trustees of trust accounts....trust document is the most important "director" of what you can and cannot do.

Good luck---you may want to talk to your tax preparer to figure out the "best" way to report this (income, distribution, expense)?

Tim

I believe you have to file a tax return whether you have income or not.

Some transactions of over $5000 will be reported to the IRS or BIG BROTHER, so not always the $10,000 limit is applied. As per my someone I know that works in a Credit Union.

Why is this YOUR problem? If it was my brother, I"d let him fork his own broncs.

Boy, that doesn't seem right. Social Security taxes kick in way, way lower than that? Back when I started FFA, they kinda frowned that I wasn't filing on $3000 income, shoulda been?

With the new health care and IRS in charge of it, won't every living human in the USA have to file???? In theory anyhow?

--->Paul

Let the trust make the repair payments directly and hes out of this one, eventually he may have real problems with not filing. 10K may not be the magic number we used to think it was, the term is structured movements intended to conceal the deal and they will sniff them out anyway they can.