US Savings Bonds Purchase Limits
 

I am looking for some information on purchasing limits for US Savings Bonds. I am familar with the rules that restrict the amount purchased in a calendar year to $30K for I Bonds and $15K for EE bonds. However, I found the following infrormation on http://www.ufcu.org/browse.php?conte...treasury_bonds

"Bonds purchased as gifts are not included when determining an individual's annual purchase limit."

So here is my question: once I max out buying bonds for myself, can someone else purchase bonds as a gift to me (understanding that the tax-free gift limit upon redemption is $11K per year)? For example, if I buy $45K for myself and my brother does the same for himself, could we each purchase another $11K worth for each other?

If this is the case, then the limit for bond purchases effectively goes away IF you can put together a buying co-op of individulas that all max out for themselves first, and then buy bonds for one another. Given the 8% - 12% annual return that can be achieved through buying bonds with a cash back credit card (see my earlier posts for info), this could become VERY lucrative.

Thoughts?

My recollection (unsubstantiated) is that what they mean by this statement is that the buyers limit is unaffected by the gift since he/she will not actually be owning the bonds. I do believe that the receiver's limit is affected by the gift. (This is unsubstantiated. I will attempt to substantiate.)

If I "give" you a million dollars, or five bananas, or a stuffed poodle, subject to our prior agreement that you will also "give" me a million dollars, or five bananas, or a stuffed poodle, the IRS will most likely view this as a "sham transaction." They will "collapse the steps of the transaction," even the two transactions don't occur at the exact same time. And that is as it should be in this case because you are trying to cheat, in my opinion.

For a gift to be a gift for tax purposes, there must be true donative intent. A circuit court appelate decision, C. Schall, 49-1 USTC ¦9298, 174 F.2d 893 (CA-5 1949), describes it thusly: "[A gift is] bestowed only because of personal affectio or regard or pity, or from general motives of philanthropy or charity."

Your scheme doesn't seem to qualify!

Doakes

Here's a link that says:

If you're buying an I Bond for a gift and you don't have the Social Security Number of the person you're buying the bond for, simply use your number. Even though your number will be printed on the bond, you'll incur no tax liability, and it won't count towards your annual purchase limit. Social Security Number is used for tracking purposes only, such as in cases where the savings bond is lost, stolen, or destroyed.

http://www.savingsbonds.gov/sav/sbigift.htm

and using the annual purchase limit link in this site you'll see:

I Bonds purchased as gifts using your own Social Security Number (because you didn't know the recipient's) won't count towards your annual purchase limit; however, they will count towards the annual purchase limit of the gift recipient.

[This message has been edited by sk3 (edited 06-28-2002).]