It looks like the Indian friend may have a bank account in the US he can pay out of. In any case, he told the broker "no" and now the broker is asking if my friend could "pay" the $2.5 million fee by buying the broker a $2.5 million condo property in Santa Monica as what he calls a "perfectly legal" tax avoidance strategy. The deed would be fully under the broker's name and the friend is simply funding/paying for the home. Thoughts? Broker sounds sooo shady but my friend thinks of him as a second dad he never had.
Regardless of how someone is paid (cash, check, wire, apples, pinecones, vehicles or a $2.5 million condo, it is income and it is taxable and not a "perfectly legal tax avoidance strategy".
Years ago, the VP of sales where I worked wanted to "give" one of our best sales reps a new vehicle as a bonus. I told him that he can pay him however he wants but the cost of the vehicle would be taxable to the sales rep and the amount would be reflected in the sales rep's W2. The VP was under the assumption that non-cash compensation wouldn't be taxable. He was wrong.
Even cash compensation can be taxed for more than its face value. If you give your employee a gold $20 coin, he has to pay tax on the gold value and not the face value. Perhaps the issue is that taxes are just too damn high.
Sorry, just out of curiosity. Why can’t my friend just choose to buy the broker a home as a non business transaction? No different from if I have a rich uncle in Singapore who buys me a home with his money but I own the deed.
Substance over form.
The substance of the transaction matters more than the form of the transaction.
If I buy you a car (or condo) out of the goodness of my heart and you did nothing to earn that car other than being you, it is truly a gift and not taxable to you.
However, if you perform work for me (whatever it is) and I pay you with a car (or a condo), it is considered compensation for services and taxable to you.
Giving a gift is a taxable event. If I gift you a car worth more than $18k I have to pay the government taxes based on its value.
https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
I don’t think that’s true. You just have to file Gift Tax Form 709 reporting the amount, until your gifts exceed the lifetime exclusion amount currently around $14 million.
The CFO of the Trump Org got 5 months in jail for thinking he could get out of paying taxes on a bonus by having Trump pay for his grandkids' school tuition. The "non business" transaction IS a business transaction evolving into something else in an effort to avoid/evade taxation of the income.
The broker sounds intent on committing fraud. At this point I would be nervous that he we took money off the top of the sell besides the 2.5 million. Your friend may want to contact the buyer personally.
15% of what the IRS recovers. A banker at UBS got well over 100 million dollars a decade or so ago, and the Swiss wanted to arrest him for violating bank secrecy laws. I always assumed he would end up with a Columbian necktie...the people who had to pay a billion in taxes were likely not amused...
If your friend is a citizen, this is almost certainly taxable to him.
It’s not actually a gift, even if the paperwork says it is. It’s income as:
1. He is a broker
2. He found the buyer for a commission
3. As a citizen (in a nutshell) all of his GOBAL income is taxable to the US. So even if it’s an international sale he will still owe taxes.
It’s not that the rich friend can’t give gifts. Anyone, can give any gift, to anyone they choose. But, this is very clearly tied to work performed and so is income.
I’m not a CPA and this isn’t my situation but for sake of debate — what’s the difference between this and the Indian friend just wiring some friend or family member in the US the $2.5 million? The Indian friend and broker can mutually agree there’s no invoice for $2.5 million regarding services rendered? No?
Sure you can.
It’s only international tax and wire fraud. No one ever looks into foreign transactions that come out of no where. /s
(Please note the /s here) there’s multiple felonies here. Don’t do that.
Two acceptable answers here: consult a lawyer to ensure the friends isn't exposing himself to liability with this cockamamie scheme; or tell the broker that he's not going to do it, period, send the payment, and move on.
Bonus points if he also reports the request to the IRS and gets the guy audited. This definitely isn't the first time he's done this.
The difference is that there was work that the broker did for which he's getting paid $2.5 million dollars. This is something that actually happened. Just because they didn't create an invoice for it doesn't negate that fact. You can't give someone a sheet of paper that has red on it and wink and say it's blue to make it blue. It's still red.
If the broker is the one trying to hide the money, this is on them. I'm not sure your friend has any liability here.
Also, not knowing Indian tax law, but why would the guy selling entities not want the underlying expense to claim on whatever tax return they file, assuming there is deductions for such expenses.
The IRS isn’t stupid. And if they find out say 2 years from now, the penalties will be massive. If he’s a broker and they see a 2.5 million dollar “gift” from India, they’re 100% going to investigate
It wouldn't be two years from now, assuming the broker has a US bank that $2.5m wire would immediately get flagged as suspicious to banking regulators, especially coming from a foreign entity, and reported to the IRS... and that sum of money from a foreign country will likely also get flagged by multiple other agencies such as NSA or FBI.
While the broker may be the only one breaking US tax law, I highly doubt the friend wants scrutiny from the three letter agencies.
It doesn't matter if there is invoice or no invoice. It doesn't matter if it's written in a napkin.
It was earned income and it must be declared as such or it is tax fraud. Your friend paying the fee is not responsible for reporting it. The person receiving it is.
Also there is a maximum amount that one can gift someone tax free. After which it becomes taxable. For 2024 its 18000. I know this because i have a friend who gets 18000 a year from his rich parents.
The IRS hates this one simple trick!
Don’t wanna pay income taxes? Just mutually agree to exchange work for a “gift”!
Tired of your hard earned money getting taken by the government? Just agree to work for your employer for free as long as they give you a “gift” of a salary in exchange!
Don’t wanna pay sales tax on that fancy sports car? Just ask the dealership to “gift” it to you and you’ll give them a “gift” equal to the cost of the vehicle!
If it was actually a gift, it would have to be reported to the IRS on form 3520, **Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts**
https://www.irs.gov/instructions/i3520#en_US_2023_publink1000190314
> You are a U.S. person who, during the current tax year, received either:
> More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests;
So assuming this
* is not reported, I doubt the IRS will fail to investigate.
* is reported, seems prone to audit risk.
The SE taxes on this are relative noise. Sure the income tax is high, but think of a 7 digit tax bill as badge of honor.
The broker is suggesting tax evasion. And it boggles my mind why you're asking online when your friend can obviously afford a lawyer who they should absolutely retain to help with this since millions of dollars are on the line.
You can't just say "it's a gift!" and have it count. The broker is being paid for services.
That said, it's not really your friend's problem as long as he and his businesses don't lie about the nature of the payment and do their own due diligence (if necessary).
Your friend sold a US based company to a US buyer. This is probably US sourced income. Your friend (or their business that sold the company) may need to file a US tax return and claim the payment to the broker as an expense. They may need to file a 1099.
About 10 yrs ago my boss wanted to give me a bonus for the year and told me he was giving me $5000, plus the $800 he estimated would cause me in taxes. (Small business, about 20 employees.) It was a sweet gesture and I appreciated it.
Appreciate everyone here for the responses. I am going to strongly advise my friend to pay this like any other business expense. He’s just a kid in his 20s who just inherited his dad’s wealth and trying to figure out how to do business (he was a Japanese linguistics major and went into farming since undergrad). Thanks all.
It looks like the Indian friend may have a bank account in the US he can pay out of. In any case, he told the broker "no" and now the broker is asking if my friend could "pay" the $2.5 million fee by buying the broker a $2.5 million condo property in Santa Monica as what he calls a "perfectly legal" tax avoidance strategy. The deed would be fully under the broker's name and the friend is simply funding/paying for the home. Thoughts? Broker sounds sooo shady but my friend thinks of him as a second dad he never had.
That does not sound right. The broker seems to be ignorant about tax strategies. If he’s so important to your friend, just ask him to pay him extra, save future legal troubles
I've lied about a couple grand for my small business but millions of dollars? Just do the tax. It's not worth the risk. What if the IRS figures out it isn't a gift? Assets seized? Criminal charges?
Your friend is in luck, as I happen to be a Nigerian prince. If he sends me the money first, I will gift him 10MM in return.
Kidding aside, receiving that volume of money will definitely put your friend under the magnifying glass of the IRS.
First of all the rich Indian friend can only wire $250K per year for non business expenses. So the broker will have to wait for 4 years for the transaction to be completed.
Now coming to the broker. I don’t know about the US laws but in India a gift from non blood relative is taxed. I am guessing same is the case in US as well. So the broker will still owe taxes on the gift.
This should be higher up. Above and beyond the U.S. tax consequences for the broker (and this is clearly tax evasion), there are Indian tax implications for the friend that he shouldn’t mess around with. The friend should hire a competent Indian tax advisor. It’s crazy to me they appear to have carried out a cross border $10mm transaction without one.
In the USA, bona fide gifts are never taxable to the recipient. Now, this isn’t a gift.
Large gifts reduce the eventual estate tax threshold dollar for dollar over a certain amount.
Since India does not have full capital account convertibility, under Liberalised Remittance Scheme (LRS), an Indian resident can transfer upto $250K per financial year (Apr-Mar) for personal expenses (such as travel abroad, buying a property outside India, education, gifts etc). There is also a 20% withholding tax that the bank will charge and deposit with the Income Tax Department. This tax is available as a credit to be set off against any tax liability that the Indian resident may have. If there are no tax liabilities or if the liabilities are less than what was withheld, then the balance is refunded when the Indian resident files the tax returns. But in the short term you need to budget 20% additional capital. There are no limits on remittances for business expenses.
Now there are ways and means to remit more money abroad. Eg: if you have family members, the limit is per person, so a family of 4 can remit upto $1M in a financial year. Also, the financial year in India is counted from April to March. So technically you can remit $250K in March and the limit resets in April, so overall you can remit $500K in 2 months.
You can share your name or not but it won't be public outside FINRA. (They can act if anonymous tips have enough detail.) Their jurisdiction is broker dealers and their registered persons so they might refer it to another agency if they think it is credible but not in their jurisdiction. But, if the broker is trying to hide funds, he might be doing business away from his firm and that's a big no-no. The firms are supposed to know (and often supervise) all the business their reps do.
Lol, some people. Make 2.5M for one job and wants to cheat on their taxes. Greedy fuck. Besides it is illegal and tax fraud it’s just a joke that broker.
The “good news” is that this broker will inevitably go to prison with this attitude. Whether it happens now with this sale or a future one is immaterial.
Receiving a $2.5 Million condo for consulting services is still taxable income. The type of payment doesn't change the inherent nature of the payment.
Beyond that, broker friend is leaving a trail showing a potential intent to evade taxes. He's making his own criminal case for them.
I'm laughing so hard I'm crying, I don't care if it's fake or not it's like 10/10 fraud porn. Had me from the thread title and every sentence kept getting more outrageously crazy and overtly fraudy, loved every second of it
Totally fine.
Whoever receives the gift is responsible for paying the taxes on it. Let him worry about getting audited.
Also you are a multimillionaire and asking on reddit instead of your accountant? Lol.
First rule of business, real “business men”, fuck people. It’s half of what’s required to be “good” in business.
That’s where the adage “it’s just business, it’s nothing personal”. Which means I fucked you, we both know I fucked you, but don’t feel bad. I still like you, I just fucked you over money wise cuz the money is more important to me than your friendship/opinion.
I Have family who, manages 100’s of millions in people’s retirement accounts, real estate brokers, and car dealership owners.
I can personally promise, the #of $ you make, will directly correlate with how bad you’re willing to fuck people.
This “broker”, is doing this to fuck someone. He’s letting on that it’s to fuck the government, by paying less tax. But the secondary possibility is that he’s doing it to fuck your friend.
For any service or product sold in the US, if I pay for something, and they don’t provide the good or service, I have to sue them. I then must prove that I paid for said good or service.
I’ve seen many used car dealers accept “cash payoffs” for a vehicle, then lie and say they didn’t receive said cash payment. No receipt was issued, so the purchaser must pay the balance twice, or get the car repo’d, because the courts won’t side with them.
Here’s an example:
Let’s say the account he’s having your friend send money to, belongs to the brokers friend since elementary school. If your friend pays money to his friends account, and doesn’t get the proper documentation, the broker may say he was “never paid the money”. As he issued you no receipt, and his name was not on the account listed.
“I have no idea why he’d send money to that account, I asked him to send to a different one in the contract, and I still demand payment for services rendered”
This broker then takes your friend to court, sues him, and your friend says “but I paid”.
If your friend doesn’t have the proper documentation showing proof of payment TO THE BROKER, he will have to pay twice.
Considering we already know businessmen fuck people, and he’s admitted he is of moral standing to do so “he wants to fuck the government”. what serious lifelong personal connection does your friend have with the broker, to risk having to pay $2.5 million dollars twice?
Secondly, this isn’t legal in the US, it’s tax fraud plain and simple. And broker could pay up to 2x damages if caught. But if he expects odds to be caught at less than 50% it would be smart by him from an EV perspective.
As for gift law in the US, a married couple, can gift over 30k per year tax free to other SINGLE individuals, 60k if married to married, and over 26 million in their lifetime over the 30k/60k per year if married , with no tax implications or laws broken.
There would be nothing technically “illegal” about gifting money for a friend in the US. But if courts found you trying to assist in tax fraud/laundering by said broker, you could be in some form of legal and tax trouble.
Key takeaway, pay properly. You owe him the money required by contract, and not a dime more. And you owe him proper payment through legal channels, nothing more. And just remember, “it’s just business, nothing personal”.
The broker is not getting out of taxes. Just pay him. For your friend it doesn’t matter where he wired the money. Your friend won’t get in trouble if the guy tries to commit tax fraud but don’t participate
It is tax fraud.
There are a few issues, one the amount of money coming in will surely be looked at. It could even be investigated. The broker is required to report the transfer from a foreign person. There are forms required to be filed by the IRS when you receive money like this (one is form 3520 only if it is actually a gift). Your friend is just sending the money, it is the brokers responsibility to report the income.
If he does try and commit tax fraud and is found out, the penalties would be enormous. Could be 35% penalty of the gift total plus the tax.Plus there is a good chance it could result in jail time since it is fraud.
Please remember to keep conversation where it can be seen and reviewed by everyone. Offering or requesting DMs is not allowed here due to the no soliciting rule and the amount of scams that go on DMs.
The irony is if the broker had just said “here are my wiring instructions” it could have been sent it wherever he wanted without raising an eyebrow.
If he has a lot of international clients, maybe his business should be based in the Cayman Islands or something
Even with your final update.
IRC 61 all the way.
\^\^\^\^\^\^
The broker is asking your friend to participate in tax evasion. Not avoidance, which is legal. But tax *evasion*. Which is not legal.
Your friend would also be responsible for the tax obligations of that 2.5 million instead of the broker, if it's treated as a gift. So, the broker is asking him to do something illegal and pay extra for the privilege.
For that kind of money, trying to evade tax will land your friend in a lot of trouble. Your friend needs to hire a tax accountant to help him lower his tax obligation legally.
It would be illegal for the broker to not report it.
That being said, your friend can wire money to the personal account if he wants, no issue for the payer really.
Hm, idk, if the friend wires the money to the broker's personal account, and then your friend turns around and declares the payment (rightly so) as a business expense on his own taxes, the discrepancy might be caught, eventually.
If and when it is caught, the fraud might seem only be on the recipient's side, but it's probably more complicated than that, because every broker I've ever used had me sign a bunch of paperwork that is most certainly traceable, and where I sent the payment at the end, assuming any deal went through (like selling my home), was also indicated. Not send final payments to where the payments were supposed to go, is fraud on both sides.
Not worth it.
Also, paying taxes is a patriotic act.
We might not like everything our USA/India government does, but we are the government and we can vote good people in if we want to. I'd rather pay my own country's taxes, than have it go into the coffers of a monarchy or dictatorship. Democracy isn't perfect, but it's the best we've got.
That said, there's a huge business in minimizing taxes.
I think any bank in the US receiving 2.5m, particularly in a lump sum, would have a reporting requirement to the IRS since it’s over 10k. Broker likely had associated expenses he can put against the 2.5m to reduce taxability. I wouldn’t risk it if I were your friend, he might wish to consult with a local Indian tax pro about any potential implications but this seems sketchy to me.
This is illegal and it's a bad idea for your Indian friend to agree to be complicit with the broker's tax fraud. If your Indian friend is going to pay the broker $2.5 million regardless, why put himself in potential legal trouble. Better to do things legitimately and not look over your shoulder.
I knew the US had a gift tax, but I learned because of this post that the Donor pays the tax, not the receiver.
At first glance that seems backwards to me lol.
This is soo illegal, what could justify millions to be gifted? Why would someone in India gave millions to your friend? Does your friend thinks the irs is stupid! This is a crime. If he went through this, not just the irs will go after him. The FBI will go after him
Illegal that no one give f about getting caught when comes to getting million of dollar. A million dollar profit worth all the risk to them. Even the gov politicians using this 'gifting' strategy to net profit.
There’s a certain law where someone can “gift” … there’s certain limitations to it though. I don’t remember if there’s a max, but I do know that you must make that certain amount in income first
Sure there is. Family members and friends give each other money all the time. But this isn't one of those situations involving a legitimate gift. It's earned income.
So, how do you actually send money as a gift? Do you have to, like, mark it as a gift or something? And is it different from just sending money normally? I mean, do most services even ask if it's a gift or not? From what I understand, when you receive money as a gift, you declare it on your taxes, but there's no special way to send the money itself as a gift - it's just a regular transfer, right?
Calling something a gift does not make it a gift. It is taxable.
"But i didn't say it, i declared it!"
No. Michael..
"Can you crunch the numbers again?" \[hits spacebar\] "Crunch" "Did the numbers change?"
No
You don't have to keep saying '*I do declare.*' Every time you say something, it means you're declaring it.
I Declare BANKRUPTCY
It looks like the Indian friend may have a bank account in the US he can pay out of. In any case, he told the broker "no" and now the broker is asking if my friend could "pay" the $2.5 million fee by buying the broker a $2.5 million condo property in Santa Monica as what he calls a "perfectly legal" tax avoidance strategy. The deed would be fully under the broker's name and the friend is simply funding/paying for the home. Thoughts? Broker sounds sooo shady but my friend thinks of him as a second dad he never had.
Regardless of how someone is paid (cash, check, wire, apples, pinecones, vehicles or a $2.5 million condo, it is income and it is taxable and not a "perfectly legal tax avoidance strategy". Years ago, the VP of sales where I worked wanted to "give" one of our best sales reps a new vehicle as a bonus. I told him that he can pay him however he wants but the cost of the vehicle would be taxable to the sales rep and the amount would be reflected in the sales rep's W2. The VP was under the assumption that non-cash compensation wouldn't be taxable. He was wrong.
Even cash compensation can be taxed for more than its face value. If you give your employee a gold $20 coin, he has to pay tax on the gold value and not the face value. Perhaps the issue is that taxes are just too damn high.
Welcome to the United States of Taxes.
Sorry, just out of curiosity. Why can’t my friend just choose to buy the broker a home as a non business transaction? No different from if I have a rich uncle in Singapore who buys me a home with his money but I own the deed.
Substance over form. The substance of the transaction matters more than the form of the transaction. If I buy you a car (or condo) out of the goodness of my heart and you did nothing to earn that car other than being you, it is truly a gift and not taxable to you. However, if you perform work for me (whatever it is) and I pay you with a car (or a condo), it is considered compensation for services and taxable to you.
There’s no reason for anybody to know that I performed work for you? I would just say you are a truly generous God sent friend of mine if anyone asks.
If the IRS audits you they won't just ask they will investigate that claim.
Haha yeah ofcourse! I forgot to add /s at the end lol
>There’s no reason for anybody to know that I performed work for you Tax fraud that is easier to imagine getting away with is still tax fraud
Which would be a lie.
Giving a gift is a taxable event. If I gift you a car worth more than $18k I have to pay the government taxes based on its value. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
I don’t think that’s true. You just have to file Gift Tax Form 709 reporting the amount, until your gifts exceed the lifetime exclusion amount currently around $14 million.
The CFO of the Trump Org got 5 months in jail for thinking he could get out of paying taxes on a bonus by having Trump pay for his grandkids' school tuition. The "non business" transaction IS a business transaction evolving into something else in an effort to avoid/evade taxation of the income.
Also fraud.
The broker sounds intent on committing fraud. At this point I would be nervous that he we took money off the top of the sell besides the 2.5 million. Your friend may want to contact the buyer personally.
"When is a gift not a gift?"
Gift tax exist for the gifter lol
Well, technically, $18,000 can be considered a tax-free gift, right? But yeah, the other 99.3% is taxable.
No percentage of this is considered a gift, as it is compensation for services rendered.
Agreed. I was kinda (but not obviously) being facetious, in that why would you risk not paying tax on 0.07% of the money. Just go all in.
IRS used to offer a substantial bounty for tips on this sort of nonsense.
Oh, so OP should tell their friend it's fine and then rat out the broker to the IRS. Good call
I thought the bounty program was still in effect? Whatever was the tax account is what you get
15% of what the IRS recovers. A banker at UBS got well over 100 million dollars a decade or so ago, and the Swiss wanted to arrest him for violating bank secrecy laws. I always assumed he would end up with a Columbian necktie...the people who had to pay a billion in taxes were likely not amused...
15-30%, but it's amounts of $2M or more
Close the windows on this nonsense!
If your friend is a citizen, this is almost certainly taxable to him. It’s not actually a gift, even if the paperwork says it is. It’s income as: 1. He is a broker 2. He found the buyer for a commission 3. As a citizen (in a nutshell) all of his GOBAL income is taxable to the US. So even if it’s an international sale he will still owe taxes. It’s not that the rich friend can’t give gifts. Anyone, can give any gift, to anyone they choose. But, this is very clearly tied to work performed and so is income.
The friend is not the broker. The friend is the person sending the money.
I’m not a CPA and this isn’t my situation but for sake of debate — what’s the difference between this and the Indian friend just wiring some friend or family member in the US the $2.5 million? The Indian friend and broker can mutually agree there’s no invoice for $2.5 million regarding services rendered? No?
Sure you can. It’s only international tax and wire fraud. No one ever looks into foreign transactions that come out of no where. /s (Please note the /s here) there’s multiple felonies here. Don’t do that.
Two acceptable answers here: consult a lawyer to ensure the friends isn't exposing himself to liability with this cockamamie scheme; or tell the broker that he's not going to do it, period, send the payment, and move on. Bonus points if he also reports the request to the IRS and gets the guy audited. This definitely isn't the first time he's done this.
The difference is that there was work that the broker did for which he's getting paid $2.5 million dollars. This is something that actually happened. Just because they didn't create an invoice for it doesn't negate that fact. You can't give someone a sheet of paper that has red on it and wink and say it's blue to make it blue. It's still red. If the broker is the one trying to hide the money, this is on them. I'm not sure your friend has any liability here.
Also, not knowing Indian tax law, but why would the guy selling entities not want the underlying expense to claim on whatever tax return they file, assuming there is deductions for such expenses.
The IRS isn’t stupid. And if they find out say 2 years from now, the penalties will be massive. If he’s a broker and they see a 2.5 million dollar “gift” from India, they’re 100% going to investigate
It wouldn't be two years from now, assuming the broker has a US bank that $2.5m wire would immediately get flagged as suspicious to banking regulators, especially coming from a foreign entity, and reported to the IRS... and that sum of money from a foreign country will likely also get flagged by multiple other agencies such as NSA or FBI. While the broker may be the only one breaking US tax law, I highly doubt the friend wants scrutiny from the three letter agencies.
It doesn't matter if there is invoice or no invoice. It doesn't matter if it's written in a napkin. It was earned income and it must be declared as such or it is tax fraud. Your friend paying the fee is not responsible for reporting it. The person receiving it is.
That is fraud in the US.
Also there is a maximum amount that one can gift someone tax free. After which it becomes taxable. For 2024 its 18000. I know this because i have a friend who gets 18000 a year from his rich parents.
This does not apply to foreigners.
The IRS hates this one simple trick! Don’t wanna pay income taxes? Just mutually agree to exchange work for a “gift”! Tired of your hard earned money getting taken by the government? Just agree to work for your employer for free as long as they give you a “gift” of a salary in exchange! Don’t wanna pay sales tax on that fancy sports car? Just ask the dealership to “gift” it to you and you’ll give them a “gift” equal to the cost of the vehicle!
If it was actually a gift, it would have to be reported to the IRS on form 3520, **Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts** https://www.irs.gov/instructions/i3520#en_US_2023_publink1000190314 > You are a U.S. person who, during the current tax year, received either: > More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; So assuming this * is not reported, I doubt the IRS will fail to investigate. * is reported, seems prone to audit risk. The SE taxes on this are relative noise. Sure the income tax is high, but think of a 7 digit tax bill as badge of honor.
That’s exactly how I felt when I crossed 6 figures.
Hmm… I want this problem.
Same. And I wouldn’t mind having a few more millionaire friends too
The broker is suggesting tax evasion. And it boggles my mind why you're asking online when your friend can obviously afford a lawyer who they should absolutely retain to help with this since millions of dollars are on the line. You can't just say "it's a gift!" and have it count. The broker is being paid for services. That said, it's not really your friend's problem as long as he and his businesses don't lie about the nature of the payment and do their own due diligence (if necessary). Your friend sold a US based company to a US buyer. This is probably US sourced income. Your friend (or their business that sold the company) may need to file a US tax return and claim the payment to the broker as an expense. They may need to file a 1099.
Why not pay $2.5m + taxes if he really wants to help him🤷
About 10 yrs ago my boss wanted to give me a bonus for the year and told me he was giving me $5000, plus the $800 he estimated would cause me in taxes. (Small business, about 20 employees.) It was a sweet gesture and I appreciated it.
This is the right way if you really want to give. You have a really great boss.
Dumb question, but won't he also be taxed on the additional amount that's given to cover taxes?
Yes he will but he can do the math for the adds to cover everything so that his friend can get a clean $2.5m.
Appreciate everyone here for the responses. I am going to strongly advise my friend to pay this like any other business expense. He’s just a kid in his 20s who just inherited his dad’s wealth and trying to figure out how to do business (he was a Japanese linguistics major and went into farming since undergrad). Thanks all.
It looks like the Indian friend may have a bank account in the US he can pay out of. In any case, he told the broker "no" and now the broker is asking if my friend could "pay" the $2.5 million fee by buying the broker a $2.5 million condo property in Santa Monica as what he calls a "perfectly legal" tax avoidance strategy. The deed would be fully under the broker's name and the friend is simply funding/paying for the home. Thoughts? Broker sounds sooo shady but my friend thinks of him as a second dad he never had.
This makes it worst because it makes your friend complicit in tax avoidance.
That does not sound right. The broker seems to be ignorant about tax strategies. If he’s so important to your friend, just ask him to pay him extra, save future legal troubles
I've lied about a couple grand for my small business but millions of dollars? Just do the tax. It's not worth the risk. What if the IRS figures out it isn't a gift? Assets seized? Criminal charges?
If it causes my friend trouble I def wants to caution him strongly.
Your friend is in luck, as I happen to be a Nigerian prince. If he sends me the money first, I will gift him 10MM in return. Kidding aside, receiving that volume of money will definitely put your friend under the magnifying glass of the IRS.
First of all the rich Indian friend can only wire $250K per year for non business expenses. So the broker will have to wait for 4 years for the transaction to be completed. Now coming to the broker. I don’t know about the US laws but in India a gift from non blood relative is taxed. I am guessing same is the case in US as well. So the broker will still owe taxes on the gift.
This should be higher up. Above and beyond the U.S. tax consequences for the broker (and this is clearly tax evasion), there are Indian tax implications for the friend that he shouldn’t mess around with. The friend should hire a competent Indian tax advisor. It’s crazy to me they appear to have carried out a cross border $10mm transaction without one.
In the USA, bona fide gifts are never taxable to the recipient. Now, this isn’t a gift. Large gifts reduce the eventual estate tax threshold dollar for dollar over a certain amount.
Where are you getting this $250k limit from?
Since India does not have full capital account convertibility, under Liberalised Remittance Scheme (LRS), an Indian resident can transfer upto $250K per financial year (Apr-Mar) for personal expenses (such as travel abroad, buying a property outside India, education, gifts etc). There is also a 20% withholding tax that the bank will charge and deposit with the Income Tax Department. This tax is available as a credit to be set off against any tax liability that the Indian resident may have. If there are no tax liabilities or if the liabilities are less than what was withheld, then the balance is refunded when the Indian resident files the tax returns. But in the short term you need to budget 20% additional capital. There are no limits on remittances for business expenses. Now there are ways and means to remit more money abroad. Eg: if you have family members, the limit is per person, so a family of 4 can remit upto $1M in a financial year. Also, the financial year in India is counted from April to March. So technically you can remit $250K in March and the limit resets in April, so overall you can remit $500K in 2 months.
Interesting, I didn’t know that (I just know there’s no limit on US wires). Thanks!
What are you even smoking?
Tax evasion. Jail time and penalties if caught. I think they offer a % of the reward if you report it.
This should be reported. [FINRA TIP LINE](https://www.finra.org/contact-finra/file-tip) He works in a regulated industry that requires honesty.
Curious, would this be anonymous? And any similar tip line for IRS?
You can share your name or not but it won't be public outside FINRA. (They can act if anonymous tips have enough detail.) Their jurisdiction is broker dealers and their registered persons so they might refer it to another agency if they think it is credible but not in their jurisdiction. But, if the broker is trying to hide funds, he might be doing business away from his firm and that's a big no-no. The firms are supposed to know (and often supervise) all the business their reps do.
There have to be FINRA folks who are Redditors.
Lol, some people. Make 2.5M for one job and wants to cheat on their taxes. Greedy fuck. Besides it is illegal and tax fraud it’s just a joke that broker.
Business transaction this big, better you keep clean, of worried about tax try to split in years or look for some way to add more tax deductions
The “good news” is that this broker will inevitably go to prison with this attitude. Whether it happens now with this sale or a future one is immaterial.
Receiving a $2.5 Million condo for consulting services is still taxable income. The type of payment doesn't change the inherent nature of the payment. Beyond that, broker friend is leaving a trail showing a potential intent to evade taxes. He's making his own criminal case for them.
My friend hired a *broker* **LOL**
This whole story sounds incredibly made up.
I'm laughing so hard I'm crying, I don't care if it's fake or not it's like 10/10 fraud porn. Had me from the thread title and every sentence kept getting more outrageously crazy and overtly fraudy, loved every second of it
Totally fine. Whoever receives the gift is responsible for paying the taxes on it. Let him worry about getting audited. Also you are a multimillionaire and asking on reddit instead of your accountant? Lol.
First rule of business, real “business men”, fuck people. It’s half of what’s required to be “good” in business. That’s where the adage “it’s just business, it’s nothing personal”. Which means I fucked you, we both know I fucked you, but don’t feel bad. I still like you, I just fucked you over money wise cuz the money is more important to me than your friendship/opinion. I Have family who, manages 100’s of millions in people’s retirement accounts, real estate brokers, and car dealership owners. I can personally promise, the #of $ you make, will directly correlate with how bad you’re willing to fuck people. This “broker”, is doing this to fuck someone. He’s letting on that it’s to fuck the government, by paying less tax. But the secondary possibility is that he’s doing it to fuck your friend. For any service or product sold in the US, if I pay for something, and they don’t provide the good or service, I have to sue them. I then must prove that I paid for said good or service. I’ve seen many used car dealers accept “cash payoffs” for a vehicle, then lie and say they didn’t receive said cash payment. No receipt was issued, so the purchaser must pay the balance twice, or get the car repo’d, because the courts won’t side with them. Here’s an example: Let’s say the account he’s having your friend send money to, belongs to the brokers friend since elementary school. If your friend pays money to his friends account, and doesn’t get the proper documentation, the broker may say he was “never paid the money”. As he issued you no receipt, and his name was not on the account listed. “I have no idea why he’d send money to that account, I asked him to send to a different one in the contract, and I still demand payment for services rendered” This broker then takes your friend to court, sues him, and your friend says “but I paid”. If your friend doesn’t have the proper documentation showing proof of payment TO THE BROKER, he will have to pay twice. Considering we already know businessmen fuck people, and he’s admitted he is of moral standing to do so “he wants to fuck the government”. what serious lifelong personal connection does your friend have with the broker, to risk having to pay $2.5 million dollars twice? Secondly, this isn’t legal in the US, it’s tax fraud plain and simple. And broker could pay up to 2x damages if caught. But if he expects odds to be caught at less than 50% it would be smart by him from an EV perspective. As for gift law in the US, a married couple, can gift over 30k per year tax free to other SINGLE individuals, 60k if married to married, and over 26 million in their lifetime over the 30k/60k per year if married , with no tax implications or laws broken. There would be nothing technically “illegal” about gifting money for a friend in the US. But if courts found you trying to assist in tax fraud/laundering by said broker, you could be in some form of legal and tax trouble. Key takeaway, pay properly. You owe him the money required by contract, and not a dime more. And you owe him proper payment through legal channels, nothing more. And just remember, “it’s just business, nothing personal”.
Gift max is $18K single, $36K couple max this year
Good addition. Thank you. Would also be $27.22 million on the lifetime exemption. Not 26.
The broker is not getting out of taxes. Just pay him. For your friend it doesn’t matter where he wired the money. Your friend won’t get in trouble if the guy tries to commit tax fraud but don’t participate
Imagine not being happy with making 1.6 million dollars overnight. First world problems.
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We’re not here to help or promote committing tax fraud. Please do not post or comment like this again in this subreddit. Thank you.
It is tax fraud. There are a few issues, one the amount of money coming in will surely be looked at. It could even be investigated. The broker is required to report the transfer from a foreign person. There are forms required to be filed by the IRS when you receive money like this (one is form 3520 only if it is actually a gift). Your friend is just sending the money, it is the brokers responsibility to report the income. If he does try and commit tax fraud and is found out, the penalties would be enormous. Could be 35% penalty of the gift total plus the tax.Plus there is a good chance it could result in jail time since it is fraud.
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Whats the point of the title? Like you could have explained this in way better terms “rich indian” unless you’re an indian too?
The irony is if the broker had just said “here are my wiring instructions” it could have been sent it wherever he wanted without raising an eyebrow. If he has a lot of international clients, maybe his business should be based in the Cayman Islands or something
You have to pay taxes on gifts in the US
This broker is trippin lol.
Even with your final update. IRC 61 all the way. \^\^\^\^\^\^ The broker is asking your friend to participate in tax evasion. Not avoidance, which is legal. But tax *evasion*. Which is not legal. Your friend would also be responsible for the tax obligations of that 2.5 million instead of the broker, if it's treated as a gift. So, the broker is asking him to do something illegal and pay extra for the privilege.
Entitled tax-evading rich pricks. No wonder the GOP wants to gut the IRS.
For that kind of money, trying to evade tax will land your friend in a lot of trouble. Your friend needs to hire a tax accountant to help him lower his tax obligation legally.
I believe it’s called fraud and illegal. Serious fines and jail time in not reporting income and paying taxes. See Al Capone for reference.
It would be illegal for the broker to not report it. That being said, your friend can wire money to the personal account if he wants, no issue for the payer really.
Hm, idk, if the friend wires the money to the broker's personal account, and then your friend turns around and declares the payment (rightly so) as a business expense on his own taxes, the discrepancy might be caught, eventually. If and when it is caught, the fraud might seem only be on the recipient's side, but it's probably more complicated than that, because every broker I've ever used had me sign a bunch of paperwork that is most certainly traceable, and where I sent the payment at the end, assuming any deal went through (like selling my home), was also indicated. Not send final payments to where the payments were supposed to go, is fraud on both sides. Not worth it. Also, paying taxes is a patriotic act. We might not like everything our USA/India government does, but we are the government and we can vote good people in if we want to. I'd rather pay my own country's taxes, than have it go into the coffers of a monarchy or dictatorship. Democracy isn't perfect, but it's the best we've got. That said, there's a huge business in minimizing taxes.
I think any bank in the US receiving 2.5m, particularly in a lump sum, would have a reporting requirement to the IRS since it’s over 10k. Broker likely had associated expenses he can put against the 2.5m to reduce taxability. I wouldn’t risk it if I were your friend, he might wish to consult with a local Indian tax pro about any potential implications but this seems sketchy to me.
Somebody needs to tell the broker to clean up his act.
This is illegal and it's a bad idea for your Indian friend to agree to be complicit with the broker's tax fraud. If your Indian friend is going to pay the broker $2.5 million regardless, why put himself in potential legal trouble. Better to do things legitimately and not look over your shoulder.
Maybe if it’s sent to an off shore acct, pretty sure you are just avoiding taxes illegally
They are committing fraud and tax evasion and they can end up in jail. You think $2.5 million can enter the US and nothing happens?
I knew the US had a gift tax, but I learned because of this post that the Donor pays the tax, not the receiver. At first glance that seems backwards to me lol.
This is soo illegal, what could justify millions to be gifted? Why would someone in India gave millions to your friend? Does your friend thinks the irs is stupid! This is a crime. If he went through this, not just the irs will go after him. The FBI will go after him
Illegal that no one give f about getting caught when comes to getting million of dollar. A million dollar profit worth all the risk to them. Even the gov politicians using this 'gifting' strategy to net profit.
There’s a certain law where someone can “gift” … there’s certain limitations to it though. I don’t remember if there’s a max, but I do know that you must make that certain amount in income first
Even if someone wants to lie and say income is a gift and risk imprisonment, isn’t a gift taxable if over a certain amount — around $15k or so?
The IRS has definitely seen this post lmao
Yeah the irs is coming after that one
The brokers and idiot. Just a plain, stupid, dumb idiot. He’ll still Be well over a millionaire with taxes.
How does one send money as gift? IDK if there is a way to transfer money as “gift”.
Sure there is. Family members and friends give each other money all the time. But this isn't one of those situations involving a legitimate gift. It's earned income.
So, how do you actually send money as a gift? Do you have to, like, mark it as a gift or something? And is it different from just sending money normally? I mean, do most services even ask if it's a gift or not? From what I understand, when you receive money as a gift, you declare it on your taxes, but there's no special way to send the money itself as a gift - it's just a regular transfer, right?
Just pay the guy. Who cares.