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Being extremely old-fashioned (and paranoid of banks and any investment vehicles), my parents have been squirreling away cash for the better part of 30+ years. Before you start harping on how foolish and naive they have been and how they've been losing value on that money, trust me, I have already been down that road with them before to no avail. Anyway, that's not what this post is about. The reason for this posting is that my wife and I are considering buying a house possibly in the next 10-12 months. As such, my parents have indicated that they would be interested in footing 20% of the purchase price (in additions to whatever sum we would put down - probably 10-15% on our part for a total of 30-35%) to avoid PMI, etc.

The central issue here is that the 20% from my parents would be least $100K (if not slightly more). The problem is that sum from them will be $100K+ in cash. Obviously, we're not going to be able to fund the home purchase with cash (it would need to be in the form of an electronic payment/check). Therefore, the question is, how do we put that $100K+ into our bank account without incurring suspicions of illegal activities or special notices from the IRS, fraud, etc. on both of us and our accounts (i.e. mine and my parents)? Should my parents just start putting in smaller cash deposits into my account now on a regular basis? If so, how much should these deposits be?

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Banks are required to report cash transactions > $10k. If it is legitimate money you should have no problems.

http://www.irs.gov/businesses/small/article/0,,id=148821,00.html

Who cares what the gov thinks. Just put it in the bank, nothing is going to happen..

What the above two posters are failing to mention and is extremely important to the above, is that gift tax rules become an issue. If your parents have less than $1m (and will likely be the same when they pass), then it doesn't really matter. They can gift the $100k, and they just need to file a document with the IRS (and neither of you have to pay any taxes on the gift).

If they want it treated as a loan, then there is a minimum required that they charge in interest to you. They can gift that interest to you, but they are required to show that the loan itself is not just a gift. If you won't be paying interest but they will expect the money back, then you can draft up a loan agreement, you can mail them monthly checks with "July 2010 Interest & Principle Payment" in the memo line, and they can mail you back the portion that is interest as a gift.

I'm not a bank and I'm already suspicious.

I say do it in $9999 deposits in as many different branches as possible!

davef139 said: I say do it in $9999 deposits in as many different branches as possible!
Should he just ask to fill out a SAR too while he's at it?

I recently purchased a home as well. My in-laws are overseas and they wired the money in to help with down payment. After the fees, the total was slightly less than 100K. We did not think much of OP's issue. Just writing to share.

whodini said: I'm not a bank and I'm already suspicious.

It's actually not that hard to save $100K+ over the years if you never ever take any vacations, drive economical cars into the ground, eat out only twice a month (and that's only at fast food places), do all your own landscaping, work from home, buy clothes only at 70-90% clearance, don't even have central or even room air conditioning, heat the house to only 65C in winter, never spend money on movies, books, don't worry about 'keeping up with the Joneses," having three kids who went to college with full academic scholarships, etc. Living well below one's means, and having absolutely no debt whatsoever.

Heck, my wife (23) and I (30) already amassed ~$150K+ in savings from just the last 4 years and we don't even save to the extent (or even remotely close to it) of my parents. We've vacationed in Europe, Hawaii, within US, eat out, etc. Granted that we have stable decent paying jobs and we don't have kids or a house to maintain at the moment, but saving money by living within one's means is quite easy to do for some of us.

Is your parents really keeping 100K in cash in their home? That's a problem by itself. Set them up with a short-term CD or something.

do178b said: Is your parents really keeping 100K in cash in their home? That's a problem by itself. Set them up with a short-term CD or something.

No, not in home - in banks deposit box. With regards to CDs, trust me, I have tried and I can't convince them otherwise.

They should give you the money cash and you should slowly deposit it into your account over time. $5k here, $3k there, $9k next week. Don't even tell the IRS it was a gift from them, consider it always being your money. Don't put it all in at once, and don't surpass the $10k "limit".

PsychoFan said: whodini said:

Heck, my wife (23) and I (30) already amassed ~$150K+ in savings from just the last 4 years.



Then why do you need the money from your parents?

FoolishJumper said: What the above two posters are failing to mention and is extremely important to the above, is that gift tax rules become an issue. If your parents have less than $1m (and will likely be the same when they pass), then it doesn't really matter. They can gift the $100k, and they just need to file a document with the IRS (and neither of you have to pay any taxes on the gift).
This isn't true. A gift of more than $13,000 to an individual in any calendar year is subject to the gift tax, payable by the person giving the gift. Read up on the gift tax here: http://www.irs.gov/publications/p950/index.html

To avoid this, each of your parents can give $13k to each of you and your wife this year (mom to wife, mom to you, dad to wife, dad to you), for a total of $52k, and then they can do the same again in January.

PsychoFan said: do178b said: Is your parents really keeping 100K in cash in their home? That's a problem by itself. Set them up with a short-term CD or something.

Trust me, I have tried and I can't convince them otherwise.


Forgetting the argument about lost interest because it is actually pretty minimal if they get more piece of mind from keeping it at home, have you suggested to them the possibility of burglary and the money all being gone? At least if they aren't going to deposit it into an account they could put it in a safety deposit box at a bank.

mazeroth said: PsychoFan said: whodini said:

Heck, my wife (23) and I (30) already amassed ~$150K+ in savings from just the last 4 years.



Then why do you need the money from your parents?


Never said we 'needed' the money, they 'wanted' to do it. We would not have even considered accepting it if it was going to have an impact on their standard of living. As of right now, the money is just "sitting" there, so by accepting it, we (parents and us) are in effect putting it into somewhere more secure (note we do not view a home as an investment, it's a place to enjoy and live) rather than as cash in a home.

krzywon said:

To avoid this, each of your parents can give $13k to each of you and your wife this year (mom to wife, mom to you, dad to wife, dad to you), for a total of $52k, and then they can do the same again in January.


Would they need to do Form 709 for each gift or would keeping it at 13K avoid the need for that? Basically trying to minimize as much attention on them as possible. Like I said, they're paranoid about banks and IRS thus the reason for squirreling cash for such as long time.

LH2004, what's your basis for giving krzywon's reply a negative rating?

There are tax implications of a monetary gift of that nature. Gifts of 13K per year per person max. If you are going to buy in 2011. You can do 104K without getting into gift tax issues ( mom gives 13K to you 13K to wife, dad gives 13K to you 13K to wife each this year and next. I would plan it such that the 100K spreads out between this year and next as a result.

I sure hope your parents house never gets burgled...!

Why can't you just keep it in cash in a safety deposit box and launder it over time if you are so worried?

FoolishJumper said:
If they want it treated as a loan, then there is a minimum required that they charge in interest to you. They can gift that interest to you, but they are required to show that the loan itself is not just a gift. If you won't be paying interest but they will expect the money back, then you can draft up a loan agreement, you can mail them monthly checks with "July 2010 Interest & Principle Payment" in the memo line, and they can mail you back the portion that is interest as a gift.


Loan needs to be very carefully drafted and documented. Anything much lower than prevailing interest rates (say 4%) can be argued as a disguised gift. If audited, it'll be OP's and parent's burden to show that the money was always intended to be repaid (like you mentioned monthly checks with clear memo lines paid on time). Otherwise assumption will be that it was a gift disguised as a pseudo-loan. Back taxes and penalties could be very nasty on that if found out like 5 years down the line. Of course, you could mix and match with annual exemptions. Structure it as a loan and pay principal+interest normally but still receive $52k per year in tax-exempt gifts. That gift could be used to reduce principal, pay for monthly payments, etc ... you get the idea.

As far as avoiding gift tax, there's the annual $13k exemption per person per beneficiary (so $52k from both parents to OP+wife), and there is also unified credit ($345.8k credit for donations of up to $1M). That's a lifetime of gifts amounting to less than $1M but that could allow for a lump sum over $52k to be gifted without paying gift tax. You should use both within a single tax year filing (so use $52k exemption and then apply unified credit for gift tax owed on amount above that if necessary) and file form 709 to avoid gift tax (read applying unified credit part of IRS publication 950).

As far as not looking suspicious, it probably doesn't matter how you deposit it. It can be a lump sum >$10k or a series of smaller deposits adding up to more than $10k within that tax year. It's meant to prevent people dealing in cash from illegal activities from getting away with it. I'd think those organized crime people would be more experienced than your parents in evading notice however. So the banks will likely notice regular small deposits and add them up and report them as soon as it gets over $10k. IMO it'll only look more suspicious if you try to hide it IMO but feel free to try.

If it gets reported, parents should get notice at tax time that IRS was notified of the deposits. So assume that it will be reported to the IRS. That said, if it's legitimate money, then it should be fine. Whether that's enough to trigger audit flags I don't know but with IRS struggling for revenue, I wouldn't put it past them. So whatever you do, document it clearly.

avhokie said: LH2004, what's your basis for giving krzywon's reply a negative rating?

Most likely for not reading Pub 950 carefully and forgetting the unified credit.

Shandril said: avhokie said: LH2004, what's your basis for giving krzywon's reply a negative rating?

Most likely for not reading Pub 950 carefully and forgetting the unified credit.


Thank you for being helpful, unlike idiots like sage1166 who just neg a question for no reason.

Shandril said: FoolishJumper said:

If it gets reported, parents should get notice at tax time that IRS was notified of the deposits. So assume that it will be reported to the IRS. That said, if it's legitimate money, then it should be fine. Whether that's enough to trigger audit flags I don't know but with IRS struggling for revenue, I wouldn't put it past them. So whatever you do, document it clearly.




Thanks everyone. I'm liking the $13K gift approach (i.e. Dad to me, Mom to me, Dad to wife, and Mom to wife). Basically it would be dad and mom each depositing separate $13K in cash into my bank account and again for wife's. How would one prove to the IRS to the legitimacy of cash squirreled from 30+ years of saving in the event of an audit?

It's been already stated but I'll state it again... The banks WILL notice the deposits in any amount... you're depositing CASH after all and it's most likely recorded as a CASH deposit. Eventually it will get reported once you've exceeded the $10,000 in deposits over a undisclosed period of time.

You're much better off just making one large deposit using the gift tax rules.

Oh, and perhaps borrow a bit of your parents paranoia and never again post on a public forum that you parents have in excess of $100,000 CASH in their home. It's ok to be vague when you ask your questions.

OP: "I'll be buying a home and I'll be receiving a cash gift to help with the home purchase. Is there anything I need to worry about when depositing the cash in the bank? Is there anything that needs to be reported to the IRS by the person making me the cash gift?"

No specifics about "who" or "how much", but still asks your questions.

One point that no one has mentioned... It is illegal to transfer money in such a way as to try to avoid the bank's mandatory reporting requirements for transactions > $10K. If you do a bunch of $9K transactions, THAT will look suspicious, and may get you in trouble. My advice, go to the bank and explain the situation and ask their advice.

avhokie said: LH2004, what's your basis for giving krzywon's reply a negative rating?Because it's not right.

You also have the $1 million life time examption.

btw. LH2004 is one of the best tax guy on FWF.

PsychoFan said: Shandril said: FoolishJumper said:

If it gets reported, parents should get notice at tax time that IRS was notified of the deposits. So assume that it will be reported to the IRS. That said, if it's legitimate money, then it should be fine. Whether that's enough to trigger audit flags I don't know but with IRS struggling for revenue, I wouldn't put it past them. So whatever you do, document it clearly.




Thanks everyone. I'm liking the $13K gift approach (i.e. Dad to me, Mom to me, Dad to wife, and Mom to wife). Basically it would be dad and mom each depositing separate $13K in cash into my bank account and again for wife's. How would one prove to the IRS to the legitimacy of cash squirreled from 30+ years of saving in the event of an audit?

There are two separate issues (it is contained in the previous responses but I think it is worth making clear):

1) How do you your parents get the 100k in cash inside a financial institution (I dont mean physically into a bank safe deposit box, though that would be better than keeping it at home). This has nothing to with their gifting/loaning it to you. Cash deposits of that magnitude can very likely raise some eyebrows. Short of producing records of earnings/spending etc. for past several years, I am not really sure what can be done to explain it. As has been mentioned, depositing it in chunks of 9k is not a good option.

2) Gift tax implications for giving 100k. As has been mentioned, you can manage that easily with a 52k gift in 2010 and 48k in 2011.

I would suggest parents depositing a big chunk into their a/c and writing you a check instead of going about separate 13k cash deposits.

On a similar note, if parents are gifting you 100k, I am guessing there is lot more in cash lying at home. They need to worry about getting that into the bank in the long run.

yep just have them deposit $52k into their acct this year, write the 13k to each checks with gift notation and repeat next year, do it all at once and get it over with

Dont play the structuring game of depositing small amounts over time, that is far more suspicious

SUCKISSTAPLES said: Dont play the structuring game of depositing small amounts over time, that is far more suspicious

This is very good advice. You're going to set off more alarms by making a bunch of smaller deposits than one large one. One large one looks like a gift, especially if you do $52k where you're quite obviously maxing out the yearly gift exclusion. Lots of small ones, especially in cash, is going to look like you're doing the laundry.

I see 2 issues here.

1. Gift tax. You're not paying anything in gift tax. You either do $52k this year and $48k next year, maxing out the yearly exclusion, or you do the whole $100k this year, with $52k excluded on the annual basis. The other $48k then goes against the $1M lifetime exclusion. If your parents have less than $1M in assets, then you don't have to worry about that and they should give it all to you now. If they might have to be worried about the lifetime exclusion, that's where you might want to divide it up over two years. If you're unsure, it wouldn't cost much to consult a tax adviser.

2. How to deposit/transfer it. Personally, I'd have them open an account with the bank where they're keeping the money if they don't already have one. Take the money out of the box, walk it to the window and deposit it into that account. Then they write you a check. First off, you avoid the risk of getting mugged while carrying a large sum of cash. Second, there is a single large cash deposit that is easily documented (or 2 if you do it over 2 years). The documentation concerns are both IRS (show that it's previously earned and taxed money) and OCC (show that it's not laundry). Do *not* worry about the fact that it must be reported for being over $10k. Worst case, your parents will have to provide some documentation to either IRS or OCC or both. Old people having large sums in cash is nothing new to those agencies. Structuring your deposits to avoid the limit is going to cause *way* more questions and can be, by itself, illegal.

avhokie said: Shandril said: avhokie said: LH2004, what's your basis for giving krzywon's reply a negative rating?

Most likely for not reading Pub 950 carefully and forgetting the unified credit.


Thank you for being helpful, unlike idiots like sage1166 who just neg a question for no reason.


Looks like the rest of the bunch are showing their faces now

ZenNUTS said: avhokie said: LH2004, what's your basis for giving krzywon's reply a negative rating?Because it's not right.

You also have the $1 million life time examption.

btw. LH2004 is one of the best tax guy on FWF.


Thanks. I wasn't challenging, I was just hoping for more information.

Besides possible tax considerations and worries of a possible SAR (Suspicious Activity Report) caused by a large deposit - it's better to have an SAR from a large deposit than to structure deposits to avoid the $10K threshold for mandatory reporting because the latter is clearly illegal -- another consideration is how your mortgage lender would perceive a sudden increase in your deposit account balance.

If the lender asks why your deposit account balance has increased significantly, you might need a letter from your parents (the source of the deposit) stating that it was a gift; otherwise, the increase might be treated as another debt, and thus affect your chances of getting approved for the mortgage loan.

Ideally, it would be best if the large deposit took place several months before you applied for a mortgage loan; it depends on how many months of bank statements your lender would request. When I last applied for a home purchase loan, I think I needed to supply 3 months of bank statements.

PsychoFan said: do178b said: Is your parents really keeping 100K in cash in their home? That's a problem by itself. Set them up with a short-term CD or something.

No, not in home - in banks deposit box. With regards to CDs, trust me, I have tried and I can't convince them otherwise.
You as well as FW responders may consider the following a side issue, but hear me out. If your parents are keeping their "cash" (when I first read your original post I assumed you meant a money-market fund or equivalent, but by now I understand you mean actual cash - raw greenbacks) in a bank safe deposit box, there could well be dangers. Depending on exactly where the bank is - what about floods? fires? mold? etc... I have always heard that the FDIC does NOT insure the contents of safe deposit boxes (unless said content also happens to be, perhaps, a paper certificate for a CD from that bank, but then the FDIC is insuring not the physical paper inside the safe deposit box, but because it is "a CD from that bank").

there's a lot of lucky people here when they have relatives that can just hand over 100k to them,

Well even if you deposit a 100k at once the gov will just keep an eye out seeing what you are doing. Now since you going to buy a house they might check into it more and if you deposit bit by bit from week to week expect the gov to crack down on you. Doing what lindylady and FoolishJumper is your best bet. If you do what Davef139 said you will mostly like get arrested within a few days for question. Any deposit made more than 10k within a week will become suspicious. One other way is a home base business just have you parent buy stuff from it (not getting anything) and give you money order eBay is a good way to do this with small fee. Do remember if the amount is too high the gov will keep an eye out.

kimmo said: One other way is a home base business just have you parent buy stuff from it (not getting anything) and give you money order eBay is a good way to do this with small fee. Yes, turn what in all likelihood would have been a tax-free gift into fully-taxable business income. Brilliant! Not to mention raising suspicions of money-laundering and manufacturing income....

In my experience, I've seen many folks skirt the gift tax by giving their children small amounts over the calendar year which add up to much more than $13K/parent. I'm not advocating bypassing of the gift tax law but just want to state the obvious. There are a lot of folks who store cash in their safe deposit boxes which can't be traced as a gift.

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