Having my tax forms handy, I calculate that the tax on $1,000,000 of income would be $329,074.25 (assuming a single non-head-of-household status).
I assume that’s only the Federal bite, though. Or did you include State taxes for that?
IME, the best way is to send the recipient an e-mail explaining that you need help moving this bequest. Just get their checking account number and SSN and you’re all set up! 
(Mostly. My million seems a little slow in arriving . . . in fact, my account balance actually seems lower this week . . .)
what is wrong with ‘giving’ the person a $1M loan at 0% interest with a deferred repayment period of 10,000 years?
I don’t know about other states but Indiana still has an estate tax. When my mother passed a couple of years ago I had to look into how much her accounts had to be worth in order to have to pay it. I don’t remember how much it was but we came in far below the number.
How about investments? Drop off a million dollars at Scottrade or Edward Jones, put it into some investments, draw it out after a while or have it transferred to your checking account. As the money comes from EJ then it would be less likely to be questionable and the only tax would be on what ever interest was made before the withdrawel.
Or just leave it there and keep drawing interest. Do trading houses like these ask as many questions as the banks? Do money launderers run spare cash through Wall Street from time to time?
I always imagined something like this would work:
(1) Set up a second residency (some cheap apt. somewhere) or maybe even a P.O. Box geographically separate from yourself
(2) Create a foundation (“The Heritage Group”, “The Gooding Consortium”, etc.) and put all the money into that. Create a checking account and hire a CPA.
(3) Any money you give away comes from the “foundation”. You can even serve as a public “representative” of the organization (if anyone comes asnooping) and just claim that it’s a private non-profit assembly of philanthropists who look for opportunities to contribute back to the community blah blah blah.
If I were to win the lottery, I would do everything conceivable to not let anyone (and I mean anyone, besides my wife and my CPA) know that I’d won, and something like the steps above is how I’d go about doing it. I could get a “salary” from the “foundation” but would have all the money, investments, interest, etc. be listed under this phantom group. All charity donations would be anonymous through the foundation and I’d obviously see what kind of shelters would be available to me, but I’d have my name tied directly to the group as little as possible (beyond the administrative necessities).
Anonymity. The question isn’t about avoiding paying gift tax, it about how to give a person a large sum of money without them knowing where it came from, and without the government assuming it’s racketeering money and consficating it.
Monkey Lore’s question Labdad’s answer are interesting. If a large package of cash was delivered along with some kind of reference number for a particular Form 709 submission, then the gift might be legit and tax paid, but the recipient wouldn’t be able to trace where it had come from. Or maybe they would.
The Abandoned Property and other “finders-keepers” legislation in Gfactor’s staff report were more the kind of thing I had in mind though. A transfer truly untraceable even in theory, where the recipient can legitimately declare it and pay the tax on it, but the government can’t impound or confiscate it.
To challenge a few of the ideas here:
The US does have an inheritance taxes, although I’m not sure whether a $1 million bequest would be over whatever the threshold is (my ex-in-laws became U.S. citizens mostly because they have no intention of returning to Canada, and the limit for citizens is higher than for residents).
Canada forbids inheritance taxes by law. Even probate fees that were based on the size of the estate were ruled invalid, because they were effectively inheritance taxes. Similarly lottery winnings in Canada are not taxed (nor are most the proceeds from an annuity – if you win $20 million, you get a cheque for $20 million right away). Maybe the best way is to give your money to a Canadian.
A loan with 0% interest and a ridiculously long term would violate all sorts of tax codes. Not surprisingly, the IRS have thought of such tax dodges.
I am in Canada , I can accept your million dollars with out any problems , as a matter of fact it would cure my problems , a wife thats needs cancer treatments , kids in universtiy that cost a fortune , and a boss that is an idiot that I have to work for cause I can’t afford to start up my own business with everything else going on …yes sir I could accept your million and it would ease my burden , not ad to it .
I don’t think the recipient of a gift need declare it. The giver is expected to pay gift tax. If it is given anonymously, I am sure the gov’t would find some way to take it away. A friend of mine got a surprise bequest of a million bucks. To his great surprise, his friend (whom I also knew, but not well) was worth $40 M, inherited from his parents. His only living relative was his sister who got the other $40 M. So when my friend and his wife ministered to him through his 6 month bout with pancreatic cancer, they were astonished when he turned out to be wealthy and left them a million. He also endowed a professorship named in honor of this PhD advisor. He had the good fortune (!) to die in 2009, the years with no inheritance tax. I assume the residue went to his sister, but I don’t know that.
Note: OP was posted on 04-12-2008, 06:00 AM.
Send the irs one million credit on their taxes. They will get a rebate check from a business you Set up. Also send them a letter in the mail explaining the rebate check is real.