I actually asked for and received a 20-pack of white socks for Christmas one year, and my black socks only come in two varieties (thin for summer, thick for winter, which you can tell because the thin ones have a stripe on the toe). It really does make life easier. The issue I’m running into now is that the white socks are starting down the route to holiness, and they’ve all turned a bit gray, so I’d have to replace all of them to keep the “all white socks match each other” ideal, which feels wasteful. I suppose I could donate them to a shelter (I hear socks are always in demand), but I dunno if they actually want used socks.
I think you are complicating the question with issues that aren’t relevant to the OP’s question. He is trying to keep his identity anonymous to the beneficiary, not from the lender. He says that in the post.
Yes, if yellowjacketcoder gives more than $14,000 in one year to a single recipient, he might have to pay gift tax on it, if the gift exceeds the amount of his available unified credit, but he pays that tax himself and neither he nor the IRS has to tell the recipient of the gift whether he paid any tax. So this does not blow his anonymity.
The OP doesn’t seem to plan to pay the money in cash, so the $10,000 currency transaction reporting threshold seems completely irrelevant. Even if he did pay the money in cash, the bank would file the currency transaction report with FINCEN, not the recipient, so this still doesn’t blow the anonymity. He certainly never said he planned to structure payments in sub-$10,000 increments to stay anonymous.
You say that some banks don’t take deposits from anyone but the account holder. If similarly, some lenders don’t take payments from anyone but the borrower, this would be an obstacle to the plan, but I’m not sure this is a real limitation or, if it is real, that it would be a policy of his friends’ lenders. I’m sure many lenders are happy to take payments from whoever is willing to pay it. I had a student loan lender who took payments from my employer for instance.
I don’t know if yellowjacketcoder could keep this payment anonymous; I’m just not sure the problems you identified are actually the ones he would face.
Same in Australia. To the best of my knowledge, the US is the only place where they don’t let lottery winners be anonymous, and it’s the only place I’ve heard of that taxes lottery winnings. In Australia, if you win a $30 million lottery, you get $30 million, tax free and (if you wish) anonymously.
ETA: Cite: I have personally met someone who won multiple millions in the lottery. And no, he didn’t squander it.
You can’t guarantee your anonymity without the cooperation of others, who would in fact know your identity. Then you are dependent on them to keep it to themselves. A lawyer is your best bet because the lawyer could face sanctions for violating confidentiality.
If you start paying someones bills because they are on some type of welfare you could put them in a worst situation where the government sees this as income and kicks them out of there housing and takes away their food stamps. In this situation then you should be prepared to support them further to make up for their loss.
Canada does not have anonymous lottery winners either. It’s not just to avoid fraud (famously, in “1984” Orwell describes a state lottery which takes the money and makes up winners.) but also cases like the one in California where the only reason the husband found out the ex-wife had hidden the winnings from him during the divorce, was that a financial services company sent their management offer to her ex-address - two years later. But again, lottery winnings are tax-free in Canada.
Unless you and your significant others plan ahead, however, someone is going to get excited and spill the beans before you can clamp a lid on the publicity. Would your in-laws know to keep their mouths shut? Your co-workers? Someone will blab if you don’t keep it quiet from the start.
Also keep in mind some mortgages may have penalties for early payoffs - they bank is losing a steady stream of interest. This might contribute to a bank’s reluctance. However, yes, use a lawyer middleman to hide the original source of the funds.
The banks only get wary about $10,000-plus transactions, and structuring to avoid that, is only relevant with cash transactions. You can transfer money from one financial institution to another with no hassles; this is exactly what the jackboots want - they can trace the money in the event they need to know it is legitimate, even if the public at large cannot get answers. (Of course, if it originates in a Caymans bank, there may be more questions).
I suppose, too, if a recipient is in an interesting situation - judge, lawyer in sensitive case, head accountant for a company - receiving large amounts unsolicited could bring up interesting questions and put them in an awkward situation. OTOH, unless it’s a close relative - sibling, parents and children - they probably don’t deserve your generosity if they don’t understand this is a one-time thing and they can’t come back to you for a refill every few months.
Yes, in the USA (unlike Canada) there is an additional tax when you transfer your (taxed) income to another person. Not sure if the recipient has to declare this and who gave the gift. If so, they will need to know the source.
I doubt you can set up a charity for the purpose of funneling money to able, self-sufficient people - especially your close friends. that’s just a fake tax dodge to avoid gift taxes. I assume any charity recipients have to be legitimate, needy people, and other criteria apply.
EDIT: Si Amigo is right - there’s a long list of rules about being on welfare and getting gifts too. But then, they wouldn’t have a mortgage.
Reminds me of the joke:
Husband: “Honey, pack your bags. I won the lottery!”
Wife: “Where are we going?”
Husband: “I’m not going anywhere. You – I don’t care. Just get out!”
Let’s assume none of my hypothetical friends are on the dole so my hypothetical largess doesn’t matter. It’s outside the scope of the question, anyway.
Not really related to the question. Let’s assume anyone that finds out is willing not to tell.
What, you think moneybags McGiveaway is going to be stingy about the early payoff?
Can we stay away from “Would this be a good idea?” and try answering “Is this actually possible?”
No, you get an annuity whose Present Value is approximately $21 million but whose Future Value is exactly $30 million, or you can take the lump sum of $21 million right now.
The other question was whether the recipient must report gift to the IRS, or just the donor.
Once two people know, it’s hard to keep it secret. But we’ll take this secrecy as a given.
Of course not - it will just cost extra to get out of a car loan or mortgage. How much? good question. I’ve never had to worry about it. My understanding is when the mortgage is up for renewal, you can pay it off without penalty. Otherwise, you pay some sort of penalty.
Depends on the institution. Some may - for privacy concerns- be reluctant to disclose the current balance without the permission of the debtor. (They may see an enquiry as a clever private investigator scam.) Not sure if the same information is available from a credit report in the USA. Odds are when an accredited lawyer with actual money steps up, though, they will be happy to deal with them.
In addition to what has already been said, even if you were able to somehow anonymously pay off someone’s debts, if said person was audited the IRS would suspect, and likely presume, that they have a secret stash and/or revenue stream. The best case scenario would still be a very stressful and expensive process for them that would eventually lead back to you.
Also, with regards to buying and then cancelling someone’s debt, even if it was possible to do this without the debtor learning your identity I believe this would be a taxable event to the debtor that the entity cancelling the debt would be required to report to the IRS.
If that’s correct (and I can’t be arsed checking Tattslotto’s rules right now) then the rules have been changed since the 80s when the two major winners I’ve known won their prizes. (Apart from the multi-millionaire I met, a relative won $50K on a scratchie in about 1987. He definitely got the whole sum paid into his bank account within, as I recall it, a couple of weeks.)
Without knowing who it was from would definitely throw a red flag to the IRS that you were either laundering money or receiving unreported income. Welfare recipient or not, they would have to be able to prove that someone paid a tax on it so they could claim it as a gift. Without knowing your identity that would be hard to prove.
My lotto winning fantasy is getting everyone together in a room and just start throwing money, gold, silver and diamonds on the floor and watch them scramble. Let them deal with the taxes. Or not. 
Note buying companies are basically anonymous in that they usually have some obscure name that nobody cares about. So you set up an LLC called New England Note LLC. and buy up the mortgages. Then have a lawyer representing the company contact them and throw around some hints that some shenanigans have been going on at the company and they would like to settle prior to a lawsuit. The settlement includes a confidentiality agreement and forgoing their debts.
No.
IRS Topic 431 - Canceled Debt – Is It Taxable or Not?
See also Helvering v. American Dental Co., 318 US 322 - Supreme Court 1943
You could spend your vast riches convincing sock manufacturers to bar code sock pairs with colored threads on the toes so that you can always match them. You’d have to introduce a few variants such as using the same bar code on all contents of a multipack, but changing the bar code every once in a while so you don’t end up with the “bought a new pack and now my grey socks are matching my new white socks” problem.
Some notes on the reasoning about taxes on gifts and forgiven loans.
Regarding income tax only in the US, the gifter pays income tax on their millions when they earn it. Therefore, there is no reason for the giftee to pay income tax when it is transfered to them.
But, governments like to tax something when it changes hands. For example, sales taxes. So there’s the gift tax and its close relative the inheritance tax. It would be pure hell for people to report on their taxes everytime they gave someone $20 so these are reserved for really big things.
When it comes to forgiven loans, note that the person/company eating the loan takes it off their taxes, and to make up for that, the person who got the loan forgiven is on the hook for balancing that out.
In the mortgage scenario, no one is going to file the paid off loan as a loss. So there is no concept of the home owner having to report anything because of that.
*slight hijack. This law pisses me off more than most laws. The feds set a rule. I follow the rule. However, they think I am a little too cute about it, so they want to set up another rule to prosecute me for fully following the first rule.
It would be like if I had a business whereby I specialized in 21st birthday celebrations and took my customers to a bar and the state decided that although I was in compliance with the drinking age laws, I was too close for comfort.
What if I skirt the edge of the structuring laws by only making $9900 cash transactions one less time than what will trigger a review? Should they pass another law outlawing super-structuring? And then when I beat that law…rinse and repeat.
The thing with laws that deal with arbitrary limits is the recognition that the limit is…well, arbitrary but a certain limit needs to be set. I can drive 70mph on the interstate, but not 71. There is no real difference between the two speeds, but the understanding is that if I drive 71, the state can mess with me. But if I drive 70, the state cannot.
Fair is fair.
This isn’t hypothetical for me. I have had a version of this happen to me in real life and there is no good way to pull off the scenario described in the OP in my case and I don’t think there is for the vast majority of people.
I had trusted tax attorneys and CPA’s look at the situation and it was not beneficial in total to make that type of bulk transaction to pay off my mortgage. I can afford it on my own just fine. Instead, I asked that it be switched over to $14,000 gifts each year for me and my two children with the option for the giver to cut it off any time. That is the only free way and uncomplicated way to move significant amounts of money in the U.S. It also provides an incentive not to do anything stupid while keeping everything completely legal.
On the contrary, they want to prosecute you for trying to hide the fact that you are attempting to break the original rule, the one that says you have to pay taxes on large gifts. You want to get away with not paying the tax, so you decide to make multiple small gifts that no one will notice, instead of one big gift which would call attention to the fact that you didn’t pay the tax you were supposed to pay.
It’s not illegal to give someone $18,000. What’s illegal is for you to intentionally do it in a sneaky way (such as giving them $9,000 in October and another $9,000 in November) for the purpose of trying to hide your tracks so you can get away with tax evasion when you file your tax forms next April. OTOH, there’s nothing illegal about tax avoidance, i.e. arranging your affairs in such a way as to minimize your tax burden. For example, you could give them $9,000 in October and then wait and give them another $9,000 in January, so the two gifts fall in different tax years. I don’t see anything wrong with the “structuring” law you’re talking about.