<prompt> Human: Heres the situation: my mom and her husband are about to receive gift money from her husbands dad. My mom has asked me and my wife to accept 15k each from him as well, and then to gift her the money for a total of 30k. I know we can accept the money with no problems and its totally legal, but Im hesitant about passing it on to her because it feels like at that point it becomes tax evasion. Im in the US and have read about step transaction doctrine. It sounds like thats intended more for businesses, but is it also applicable to situations like mine? Assistant: Shes definitely trying to evade something, whether its taxes or not we cant say. Why cant her husbands father simply give them all the money? The annual exclusion amount 15,000 is only for reporting gifts. Gifts are not taxable until the giver has given over 11 million in their lifetime.Human: I dont think shes ill-intending, just ill-informed. Would her husbands dad need to pay taxes on the amount he gives them if he pays them the full amount? I highly doubt hes hit his 5.5mil thats the individual limit, right? in his lifetime.If Im understanding what youre saying correctly, he doesnt need to report a gift if its under 15k, but would need to report it its over 15k. He wouldnt have to pay any taxes on those gifts until he has given 11mil or whatever that individual limit is total in his lifetime. If thats the case, how does the IRS know his total lifetime gifts if he never gifts money over 15k? If he were a billionaire and gave away 20mil a year for ten years spread out to 2000 people 10k per person per year, would he even have to pay any gift tax since technically he doesnt need to report gifts under 10k?  <response>: Its not merely a reporting technicality. That annually excluded 15k can be given tax-free, period. The IRS doesnt need to know because they have no reason to care.Gifts count against the lifetime 11M limit only beyond that annual individual 15k. 