Tax Law (Questions About Taxes)/Odd tax question...

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Hello Mr. Stancil,

   I'm a novelist and have a rather unusual request for your assistance.  I'm writing a story about a guy that is driving home early one morning from work.  Along the lonley rainswept road he is traveling , he is passed by a corvette driving too fast for conditions.  On an old wooden bridge up ahead, our hero, sees the Corvette lose traction on the lip of the bridge, and careen sharply to the right and sail into the middle of the slough and sink upside down trapping the driver and passenger inside the car by the mud.  Our hero is a very capable fellow, and stops to render aid.  He dives a Jeep with a winch on the front.  He dives  down and attaches a cable to the axle of the Corvette and manages to lift the car out off the water far enough for him to break the window and pulls both occupants out of the car and gets them to shore and administers CPR.  He saves their lives and is hailed as a hero.  

   The following day, our hero is told that the passenger he saved is an heiress and only daughter of a billionaire industrialist.  A meeting is arranged between our protagonist and the billionare.  Needless to say, the wealthy Industrialist is incredibly grateful and wishes to reward our man for saving his only living family member's life.  Being a billionaire, he has to reward enough money that nobody in the media will question his generosity.  

   Now, this is the background I feel you need to know to assist me with this problem I've created for myself.  I want the billionaire to prepare a check for our hero equalling AFTER TAXES, five million dollars.  The stroy takes place in Portland, Oregon in 1995.  Our hero is 44 years of age, making one hundred thousand dollars per year.  His wife is a successful novelist and cleared 1.5 million the year before. married with no kids.  Question:  How much does the billiionaire's accountants have to make the check out to give the hero as close to five million dollars free and clear, as possible.  I want the billionaire to pay the taxes on the reward amount that ensure the reward equals five million dollars.

   I could spitball the figure, guessing it would be around 7.5 millon, but the problem I would have by not being acurate, is the one guy who reads my story and happens to be a bean counter and he figures out the exact amount.  In his eyes I would lose credibility and that little detail would knaw at him for the rest of the book!  The worst thing for any author is the loss of the ability to make the reader suspend disbelief long enough to enjoy the story.

   I know this is an unusaual request, I hope you could be so kind as to give me a figure to work with.    Hope to hear from you soon.

All the Best,


J. D. Lowes
amazon.com/author/jdlowes

Answer
JD,

Thanks for your question.

The $5 million is considered a gift to the "hero" and gifts are not subject to income tax. So if he give the hero $5 million, he keeps the tire amount. I would add that he donor would have to complete a gift tax return and possibly pay gift taxes on it.

Hope his helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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