Jennifer Lopez Gives Her Boyfriend Weekly Gifts Of Cash

Jennifer Lopez, 42, apparently is gifting her boyfriend Casper Smart, 24, a weekly amount of money. reported that Lopez gives her much younger, and much poorer, dancer boyfriend $10,000.00 a week so that he can provide her with the presents, dates, and surprises a girlfriend would expect. $10,000.00 a week is a lot more money than Smart is used to managing. OK! magazine says, "It was recently revealed that Casper who was sentenced on Jan. 3 to a year's probation and a $500 fine for speeding go-go dances for a mere $250 a night at L.A. club Boulevard3."

So let's say you want to give your boyfriend a weekly gift of cash. What are some of the tax implications you should be aware of?

The Basics
Gifts are taxed by the IRS, however, there are a number of ways to reduce or eliminate that tax. The IRS says that a gift is any transfer to an individual, either directly or indirectly, where "full consideration" (value) (measured in money or money's worth) is not received in return. Gifts don't necessarily have to be in cash, but could be anything that you could assign a monetary value to. I can't buy groceries with my car, but someone may buy it from me for $1,000.00. The donor is generally responsible for paying the gift tax. Jennifer Lopez's gift of cash is a gift. Even though she is receiving companionship from Casper Smart you can not assign a monetary value to that.

The Annual Exclusion
The Annual Exclusion is a tax rule that says (in 2012) you can gift up to $13,000.00 without any tax consequence.

Lifetime Gift Tax Applicable Credit
The lifetime gift tax exemption is $5 million in 2012 and the tax rate on gifts is 35%. This means that over the course of your lifetime you can give away up to the limit of the lifetime gift tax exemption without any tax consequence. This is available in addition to the the annual exclusion. Now, let's think about Lopez's particular situation.

If she were to continue giving him $10,000.00 per week for all of 2012 she would have gifted him $520,000.00. So Jennifer Lopez wanted to avoid paying taxes on the cash she is giving Casper Smart each week she could first use her annual exclusion: $520,000.00 - $13,000.00 = $507,000.00. Then she would use her lifetime gift tax credit keeping in mind it can change based on new tax laws: $5,000,000.00 - $507,000.00 = $4,493,000.00 credit left. You can imagine that a person in Lopez's particular economic situation has much more going on then Smart's weekly allowance. She would want to consider that when weighing how to use her gift tax exemptions.

Casper Smart's new job?
One way to avoid  the entire gift tax question all together would be to make Casper Smart her employee and pay him as such. Then again, that would change the whole dynamic of their arrangement...couldn't it?

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