<prompt> Human: The question: Are gifts over the annual limit of 14,000 per person taxed or just be reported on the IRS Form 709 and not taxed so long as you remain under the lifetime limit of 5.49M?Based on this website, it seems that if you remain under the lifetime limit of 5.49M, you must report any gifted value over 14,000 but not pay taxes.For example, my in-laws are gifting me and my wife 200,000 for a house that we are purchasing. In turn, we will be selling the condo that we live in, with an approximate value of 500,000 and gifting it back to my in-laws. Since this is the first time that we are gifting over 14,000 in our life, we are below the 5.49M lifetime limit.My understanding of what we must do:1. My in-laws put in the Form 709 that they gifted me and my wife 186K 200,000-14,000 186,000 above the allowable limit for the year. This value gets deducted from the lifetime limit of 5.49M.2. Me and my wife put in the Form 709 that we gifted my in-laws 486K 500,000-14,000 486,000 above the allowable limit for the year. This value gets deducted from the lifetime limit of 5.49M.3. The IRS understands that money was gifted, though no one is taxed.Assistant: Why not have your in-laws lend you 200000 and then repay them? Im not sure why youre giving them 500000 after theyre giving you 200000, but if you structure the first part as a loan, then you instead would be giving them 300000 and that is less of a reduction to your lifetime exclusion amount. Also, the in-laws wouldnt have made any gift, so they wouldnt be filing Form 709; only youd have to file Form 709. BTW, each of you and spouse can give each of the inlaws 14K, so 56K is actually not reportable. Thus your Form 709 might just show a gift of 300000 56000.Human: Why not have your in-laws lend you 200000 and then repay them?In the process of buying the home, our loan officer told us that we needed to have my in-laws sign a document stating that it is a gift for the downpayment and that we will not be repayingIm not sure why youre giving them 500000 after theyre giving you 200000, but if you structure the first part as a loan, then you instead would be giving them 300000 and that is less of a reduction to your lifetime exclusion amount.I thought that if it is a loan, then wed have to be charged an interest rate that is the minimum that the IRS allows?  <response>: Youre sort of skirting the edge of legitimacy by saying the in-laws are making you a gift, since youre going to be re-gifting the money back to them.The amount of this 200K is high enough that you would need to have an AFR apply to it, though if you repay the loan quickly, not much interest would be generated for in-laws to pay tax on.But if the loan officer is saying you cant have any outstanding loans, I guess thats a no go. 