I am headed out this week on vacation. After discussing the following with my wife Maggie, she said that I think about taxes way too much and it is time to take a break.
Anyway, I had read about Senator Ensigns affair and the payment that his mistress received from the senator's parents. (I had to wonder if my parents would have helped fund an affair for me. I did not discuss that with my wife.)
I guess I spoke with a little too much excitement when I told Maggie that the payment was a tax maneuver by the parents.
In case you missed it, Sen. John Ensign (R-Nev.), had an extra marital affair for eight months with Cynthia Hampton, a campaign staffer who is married to Douglas Hampton, Sen. Ensign's chief of staff. Sen. Ensign's parents made $96,000 in gifts (hush money) to the Hampton's in the form of eight checks of $12,000 each -- four checks each from Sen. Ensign's father and mother to Cynthia Hampton, her husband, and their two children.
The eight checks thus took full advantage of the $12,000 gift tax annual exclusion available in 2008 (it is $13,000 this year). Although there is no income tax consequences to the gift, there is most likely an eventual estate tax reduction. Assuming an estate tax of say 45%, the parents just saved over $43,000 in taxes. Furthermore, the money is not taxable to the Hampton’s.
Nice tax planning.
Off to R&R
Larry Kopsa CPA
