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Tax question ala Shawshank Redemption

Hello all. I have an odd question. I am about ready to receive a check from the sale of stock in my company. The company was 42% employee owned and it was sold so the new company had to buy up all outstanding shares of stock. I should receive about $36,000. If anyone is familar with the movie "The Shawshank Redemption" the following conversation takes place after one of the guards was complaining about how much tax he was going to owe on an unexpected inheritence:

ANDY:Mr. Hadley. Do you trust your wife?

HADLEY: That's funny. You're gonna..(Obscenities removed)

ANDY: What I mean is, do you think she'd go behind your back? Try to hamstring you?

HADLEY: That's it! Step aside, Mert. This ****'s havin' hisself an accident.

ANDY: Because if you do trust her, there's no reason in the world you can't keep every cent of that money.

HADLEY: You better start making sense.

ANDY: If you want to keep that money, all of it, just give it to your wife. See, the IRS allows you a one-time- only gift to your spouse. It's good up to sixty thousand dollars.

HADLEY: Naw, that ain't right! Tax free?

ANDY: Tax free. IRS can't touch one cent.

HADLEY: You're the smart banker what shot his wife. Why should I believe a smart banker like you? So's I can wind up in here with you?

ANDY: It's perfectly legal. Go ask the IRS, they'll say the same thing. Actually, I feel silly telling you all this. I'm sure you would have investigated the matter yourself.

I think you can see where I`m going with this as far as my stock money is concerned..Is this all just movie junk or is there any basis for all this?

Reply to
Programbo
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There are two transactions. Your receipt of the money, which is taxable, and your gift to your wife, which is an unlimited amount (not the $60K you quote). So, once you pay the tax, you should gift her what remains, I'm sure she'll thank you for it.

Joe

Reply to
joetaxpayer

As often as people mention that one should not rely on strangers on the Internet for critical tax advice, I think using a movie based on a work of fiction from Stephen King ranks even lower as a reliable source!

Interestingly, a quick search yielded up at least one serious attempt at interpreting what the Shawshank conversation was based on.

(from

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"I will admit to being a little hazy as to what Andy suggests - it is, I guess a pre-1970s tax rule. Generally, inheritances of less than the exemption (this inheritance was only $35,000) is federal estate tax free. Many states, like Pennsylvania and New Jersey, where I practice, have alternate death taxes. There are no income tax consequences for inherited money unless the redemption of the inheritance is, itself, a taxable event - meaning cashed in savings bonds with built-in interest, IRA withdrawals, etc."

Further comments from this site also include [spoiler alert, but really, who hasn't seen this great movie already?] the observation that while Andy began as an innocent, falsely convicted of murder, he has now become a criminal through aiding the warden's embezzlement and by helping to prepare false tax returns for the guards. And finally, Red and Andy "appear to live in Mexico (tax free) off of the spoils of the warden?s wrongs".

-Mark Bole

Reply to
Mark Bole

If your spouse is not a US citizen the maximum amount you can gift without triggering the gift tax is now 128k (was 125k for 2007).

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I suppose that if your spouse is a permanent resident, the rules are the same as for US citizens -- namely the gift exclusion is infinity.

If your spouse has the same gender as you (say you got married in another country, or California or Vermont which I think now recognize same-sex marriages), then what happens?

Reply to
removeps-groups

Excuse me? Did you actually watch the movie or read the book? Andy already had the money. He did not take any of the spoils from the warden's scams!

Reply to
sunny1

Andy already had the money. He did not Take any of the money from the warden's scams. I think you need to re-watch or read the book!

Reply to
sunny1

Andy already had the money. He did not take any money from the warden's scams.

Reply to
sunny1

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