Many terms are defined in these Treasury regulations, but the term "acquire" is not. So we turn to common usage to try to figure out what it means. Different dictionaries provide slightly different definitions, but a common theme is that a person or entity "acquiring" something obtains it by its own action or effort. So a true gift generally would not be "acquired." That's why a gift bond needs to be specifically listed as being included in the $10,000 limit. But reaching -- or exceeding -- that $10,000 limit only means that the account holder may not "acquire," that is, obtain by the holder's own effort (i.e. purchase), any additional bonds. The regulations do not prohibit any additional gifts flowing into the account holder's account. That would be my argument, anyway, and I think it's a reasonable one. Of course, if I were arguing for the other side, I might argue that spouses cooperating in gifting each other bonds to exceed to $10,000 annual "acquire" limit does meet the definition of "acquire," because their cooperative efforts make the whole enterprise work. But I seriously doubt whether Treasury would want to investigate whether each gift was truly a gift without consideration.The phrase "purchase limit" is used 23 times on this page already, but actually does not appear in the code linked above § 363.52. Instead, the word "acquire" is used.It seems pretty clear that self purchases+receiving gifts were meant to be limited to 10k a year (but not purchasing gifts). Since TD is a closed system they would obviously know and could block transfers of any gifts into your account after 10k, just like they block self purchases after 10k already. They could also block a self purchase that puts you over the limit due to received gifts, and vice versa. However, they haven't been doing that afaik.Code:
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.
So maybe...they are about to start! But they want to give people a grace period to deliver all their gifts now before they roll out the changes.
I worked for many years for the federal government (not for Treasury) and gained some familiarity with tax matters. I saw private tax lawyers and accountants expend great effort combing through the tax code and regulations looking for any possible ambiguity to benefit their clients. They wouldn't even call what they found "loopholes" and they certainly weren't worried about what the government might have really meant to do. And these were matters concerning hundreds of millions or even billions of dollars.
This I-bond kerfuffle is exceedingly small potatoes by comparison. And, unlike in many of the odiferous endeavors by the tax lawyers described above, it's far from clear whether the government is even prejudiced by the exploitation of this current gift I-bond "loophole." The $10,000 limit is somewhat arbitrary, and ironically for a program designed to address inflation, it is not even an inflation-adjusted limit. And then there are the present taxes that some people cashing in bonds earlier than they had planned will have to pay on the interest, which would no longer be tax deferred. And perhaps much of this extra money flowing into I-bonds through this loophole might otherwise have gone to purchase TIPS that might be even more expensive for the government given present real rates for TIPS of various maturities. So what I'm saying is don't lose any sleep that this somehow is hurting the government or anyone else. Taking advantage of this situation requires -- as it should -- complete honesty and transparency about the purchase and redemption of the bonds. Treasury has all the information it needs, and if Treasury has a problem, they'll let you know.
And the I-bond regulations themselves explicitly give Treasury the authority to waive any provisions of the regulations for various reasons including "for the convenience of the United States" so long as it's basically fair and "would not subject the United States to any substantial expense or liability." So even if my argument about acquire is not correct, maybe Treasury is just waiving the provision for now as it has the authority to do.
In any event, for all these reasons, I'm not losing any sleep giving the gift box a good workout right now. YMMV.
Statistics: Posted by PugetSoundguy — Mon Oct 28, 2024 2:08 am