<p>(1) Hello, can I give a $12,000 gift to my brother to lower the amount of money that I have in my bank account, and thus, lower my EFC?</p>
<p>(2) If so, does my brother have to report this as income (that he needs to pay taxes on)?</p>
<p>You can give the money to your brother and it won’t be taxable, but you should think seriously about whether you want to give up $12,000. That’s a lot of money.</p>
<p>yes, but can’t my brother just give it back to me after i graduate?</p>
<p>You can give anyone you want a gift of money. If you give $13,000 or less, then it’s not taxable to you. The receiver never pays gift taxes, only the giver. But then it’s a gift, so it’s not your money any more. Can you afford to give away $12,000 and never see it again?</p>
<p>Assuming you’re a student, the effect of $12,000 on your EFC is $2400. Wouldn’t you rather actually have that money to use to defray your college expenses?</p>
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<p>Then it’s not a gift, it’s a loan. It’s still your asset if you expect to be repaid.</p>
<p>Use your intelligence to invest that money over the next 4 years instead of trying to game the system :)</p>
<p>does anyone have any irs documentation on @vballmom distinction between a ‘loan’ and a ‘gift’.</p>
<p>that is, if i transfer $12k to my brother this year as a ‘gift’, couldn’t my brother transfer $12k to me (next tax year) as a ‘gift’ ?</p>
<p>You can go to Fry 's, get a 'safe box" and leave the money in there :)</p>
<p>@compaq10 - i would still need to report that as an asset, and thus would not affect my EFC. What you are suggesting is illegal, and terrible advice. I will be reporting your post to the administrators.</p>
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<p>He could. But he doesn’t have to. If he wants to, he could spend it all on a car, or a trip to Costa Rica, or dope and hookers. If you give a so-called gift with the expectation that it will be returned to you at some advantageous time, it isn’t really a gift.</p>
<p>If you give a fake gift in an attempt to defraud lenders or the government, you’re committing a crime. If you get caught, don’t expect a mere slap on the wrist.</p>
<p>This is a huge risk for a small gain, and, IMO, an idea that’s both dumb and wrong.</p>
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<p>This is not accurate. Regardless of where the money is, it’s an asset. You can bury it in your backyard in coffee cans and it’s still reported as an asset.</p>
<p>If you GIFT it to your brother, it is his.</p>
<p>If you expect repayment from your brother, it’s a loan. IF you expect your brother to give this back to you, I would suggest that you draw up an agreement in writing. Otherwise your brother could very well spend the GIFT you gave him with no obligation to return it to you at all. And he would be well within his rights to do so.</p>
<p>I agree with Vballmom…you are looking at $2400 added to your EFC. I can’t think of a better use for your savings than your education. You should be proud that you are able to contribute to your education costs instead of looking for ways to hide this so that others will be paying FOR you.</p>
<p>ok, i get it. this explains it a bit. the irs would not consider this a ‘gift’.</p>
<p>[Tax</a> Questions - gift tax vs. loan - JustAnswer](<a href=“http://www.justanswer.com/tax/03xjn-gift-tax-vs-loan.html]Tax”>http://www.justanswer.com/tax/03xjn-gift-tax-vs-loan.html)</p>
<p>the IRS may pursuant to IRC Sec. 7872 recharacterize your loan as a “gift loan” or a “tax-avoidence loan” and consequently impute interest income to you and a concurrent gift of the interest income back…</p>
<p>i will sleep better at night, knowing that i did not ‘hide’ any money through this scheme.</p>
<p>These kinds of posts trying to game the system bother me. There are all sorts of things you can do to lie, cheat and steal to lower your EFC. When you give someone the money with the understanding that he is going to give it right back to you, it is very clear that the intent is to cheat on the FAFSA. Serves you right if your brother takes the money and runs with it.</p>
<p>How much difference is this really going to make for you? If you have $12K stashed away, you are unlikely to be PELL eligible anyways. It’s not as though there are colleges lined up to subsidize you to your FAFSA EFC. The schools that tend to meet 100% of need use PROFILE and they tend to ask for sibling accounts. So the chances are that what you gain is maybe more in loan eligibility and you take the risk of being caught playing games if audited and your brother absconding with your money.</p>
<p>Or he could spend it on cool things for himself and not share any of it with you or donate it to the church or any number of things.</p>
<p>I understand the desire to protect the money. The point is, giving it away does not protect it. Lawyers sometimes advise clients to give money away, for tax or estate-planning or Medicaid planning purposes, but always with the proviso that the clients have to be willing to not get the money back. A gift is a gift. And if it’s not really a gift, the law will treat it as a loan or something else.</p>
<p>Why would you tell compaq10 that his advice is illegal, when what YOU are proposing is illegal if the intent is to game the system and fraudulently lower your EFC?</p>
<p>^^ true. The nature of OP’s question was how to cheat legally. Although I had a joking face at the end, my message was interpreted seriously and wrongly. Sorry people</p>
<p>An intelligent and legal use of the assets would be to put the funds in a 529 for college, wouldn’t that lower the EFC? I think some 529’s would let your gift deprived brother use it for college also.</p>
<p>Good suggestion, jtmoney!</p>
<p>I agree with jtmoney.</p>