Gives Her Boyfriend Weekly Gifts Of Cash
Jennifer Lopez, 42, apparently is
gifting her boyfriend Casper Smart, 24, a weekly amount of money.
EvilBeetGossip.com reported that
Lopez gives her much younger, and much
poorer, dancer boyfriend $10,000.00 a week so that he can provide her with
the presents, dates, and surprises a girlfriend would expect. $10,000.00
a week is a lot more money than Smart is used to managing.
OK! magazine says, "It was recently
revealed that Casper — who was sentenced on Jan. 3 to a year's probation
and a $500 fine for speeding — go-go dances for a mere $250 a night at
L.A. club Boulevard3."
So let's say you want to give your boyfriend a weekly gift of cash. What
are some of the tax implications you should be aware of?
Gifts are taxed by the IRS, however, there are a number of ways to reduce
or eliminate that tax. The IRS says that a gift is any transfer to an
individual, either directly or indirectly, where "full consideration"
(value) (measured in money or money's worth) is not received in return.
Gifts don't necessarily have to be in cash, but could be anything that you
could assign a monetary value to. I can't buy groceries with my car, but
someone may buy it from me for $1,000.00. The donor is generally
responsible for paying the gift tax.
Jennifer Lopez's gift of cash is a gift.
Even though she is receiving companionship from Casper Smart you can not
assign a monetary value to that.
The Annual Exclusion
The Annual Exclusion is a tax rule that says (in 2012) you can gift up to
$13,000.00 without any tax consequence.
Lifetime Gift Tax Applicable Credit
The lifetime gift tax exemption is $5 million in 2012 and the tax rate on
gifts is 35%. This means that over the course of your lifetime you can
give away up to the limit of the lifetime gift tax exemption without any
tax consequence. This is available in addition to the the annual
exclusion. Now, let's think about
Lopez's particular situation.
If she were to continue giving him $10,000.00 per week for all of 2012 she
would have gifted him $520,000.00. So
Jennifer Lopez wanted to avoid paying
taxes on the cash she is giving Casper Smart each week she could first use
her annual exclusion: $520,000.00 - $13,000.00 = $507,000.00. Then she
would use her lifetime gift tax credit keeping in mind it can change based
on new tax laws: $5,000,000.00 - $507,000.00 = $4,493,000.00 credit left.
You can imagine that a person in Lopez's particular economic situation has
much more going on then Smart's weekly allowance. She would want to
consider that when weighing how to use her gift tax exemptions.
Casper Smart's new job?
One way to avoid the entire gift tax question all together would be
to make Casper Smart her employee and pay him as such. Then again, that
would change the whole dynamic of their arrangement...couldn't it?
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