Cash gift from relatives?

[chloe]

We entered a Chapter 13 in October of 2005 - five year plan. In the Spring of 2006 we were audited by the IRS for 2003, the year in which my wife's business began melting down and our debt skyrocketed. Our records were a mess and finally, yesterday, we got notice of a tax deficiency of nearly $9,000. I suspect based on the info the Irs provided we will be able to dispute many of their findings but still expect to owe perhaps 2-3k based on an error by our accountant in understanding some items (my fault for not being clear).
My real question is - we obviously don't have any savings to deal with such amounts. My parents with whom I am very close (in their eighties) are able to help us as they are financially in a fairly good position - as such they have offered to "gift" us money to cover the taxes - but would this be allowable in a Chapter 13? Or is it possible to somehow include these tax penalties in our Chapter 13 as they are based on a period before we filed? I would appreciate any advice.

[SinkingFast]

We had a similar situation arise in regards to selling our house a couple months prior to filing. The first deal that came back had us bringing about $2K to the table to close the deal. Hubby's parents were willing to pay. Our attny gave us some advise that may work for you.

If your parents are willing and able to pay what you owe the IRS,............... Instead of them giving you the money, have them pay the IRS directly on your behalf. That way the money does not touch your hands or wash thru your bank acct.

We subsequently went back to the Realtors and said "No" to the first deal. They put together another deal that was break even for us to close.

And, as always,............ Discuss this with your attny.

[chpxiii]

One of the things that sucks about being in a Chpt. 13 is that any "windfall" of money, the trustee can take it since you are in bankruptcy. I'm not sure if it's during the whole time while in a Chpt. 13, or for only a certain amount of time after filing. I was told that it was for the duration of the plan. But I'm still not sure.

I will say this, one of the things you DO NOT want is to have any huge amount of money (especially over $1500 to $2,000) coming into your hands. SinkingFast has a great idea. That way you never touch the money.

Discuss this with your lawyer, first to make sure this can be done in such a way that you don't see the money and therefore possibly approrpriated by the trustee.

[CindyLou]

well, even if they did get a windfall from the parents and the trustee took it he would to distribute to priority creditors first and they owe the IRS....the IRS is a priority creditor, wouldn't the IRS get the money anyway?? so it would all come out the same in the end, right? By all means ask your attorney and I think having your parents give it to the IRS seems the most simple thing anyway, but I was just making a point.

[SinkingFast]

well, even if they did get a windfall from the parents and the trustee took it he would to distribute to priority creditors first and they owe the IRS....the IRS is a priority creditor, wouldn't the IRS get the money anyway?? so it would all come out the same in the end, right? By all means ask your attorney and I think having your parents give it to the IRS seems the most simple thing anyway, but I was just making a point.

True, True!! The IRS is a big dawg on the block.

We sold a truck and used the equity to pay our income taxes. Our attny felt it would be fine because we were paying the IRS. Even tho the Trustee may get PO'd about loosing out that equity, the Trustee certainly wouldn't go back to the IRS for the money. As Cindy said, the IRS is a Priority Creditor.

Definitely ask your attny what is the best approach to getting the IRS paid.

[chloe]

Thanks

Thank you all for responding - I am certainly going to talk to our attorney this week but these things always seem to arrive on Friday afternoon. I appreciate all your points.