The web isn't open and you pay taxes on a worthless gift: You can't run, you can't look, and you can't hide

Nothing in life is free. But now it can cost you a bundle when you get a worthless gift. Two lovely gifts in the National Law Journal: Gifts and limits on public information on the internet.

Plain view information isn't for you to use

All this internet stuff sure is deceiving. On one hand you can look at anything. Even law enforcement can say "It was in plain view" after they move things.

But now, the internet really isn't in plain view. One guy got nailed for accessing public information: 154, 293 files. It was web based.

See Nick Ackerman. National Law Journal. 14 Feb 2005. Page 12.

In re 274 F. 3d. 577 (1st Cir 2001); 318 F. 3d 56, 64 (1st Cir, 2003)

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Stupid relatives can leave problems

Apparently, if your relatives are dumb enough to invest in worthless financial instruments, you can still get stuck with paying the tax.

Translation: Even though the gift they gave you is now worthless, you're stuck with the taxes. That's not a gift.

See National Law Journal Thomas S. Simmons "When Gift Planning Goes Awry", 14 Feb 2005, page 13, 18.


The risks -- relatives who use this to force others into bankruptcy, or to work to repay debts

How it is done

1. Using a derivative, there's nothing stopping the donor from pegging the value of the gift to some arbitrary-early-time, then draining out the equity of the gift; or

2. Tying some third instrument like a shortsale to the value of a gift that is opposite this worthless asset: As the worthless asset goes down in value to zero, the cash value of the asset to fund the litigation against the donor goes up.

Why isn't the estate stuck with the taxes?

How are the "donees" protected from this?

What kind of country would allow this absurdity?