<prompt> Human: My parents and my inlaws are both planning on gifting us 40,000 towards the down payment on our next house. We would then pay them back after our current house sells and we get our equity back out of it. My understanding that since they are both below their lifetime exemptions for gifts, they could avoid the gift tax. Would we be taxed on that as income? Is there a better way to do this?Our market is crazy hot, our house will get multiple offers within 24 hours, so no party is concerned about not getting their money back. No seller will entertain a contingency on us selling our house in an offer because they get multiple full price offers.Edit: thanks everyone for your replies! There are several ideas being thrown around right now with the family. To answer a few of the replies that were the same, yes the lender is aware of the potential gift. The lender knows it would be a gift and not a loan and provided documentation for them to sign certifying that it would be a gift.  <response>: If you structure this as a loan, then you technically need to be paying a minimum amount of interest called applicable federal rate related to the term of the loan.If your parents and inlaws treat this as a loan but forgive the interest -- i.e. they dont actually ask you to pay them interest, then the paperwork involved means They get imputed interest income that you didnt really pay them, which is taxable to them each year. They make a gift to you of the same amount back. That probably doesnt involve any gift taxes since the amounts are smaller than the annual exclusion.So there is a slight record-keeping disadvantage to the parents if they choose to make this a 0 loan type situation, because AFR still applies.These arcane rules were put in place to prevent parents from lending their children huge sums of money, having the children invest it, and pay taxes at childrens lower tax rate. 