<p>To my knowledge, most of her wealth comes from the sale of two businesses. I guess that would qualify as post-tax investments.</p>
<p>Here we go again. Bay, we don’t know enough about your millionaire sister’s financial situation. Does she have $1 million in her bank account? If she is living off savings she might have no income at all. In that case, she will not be eligible for ACA subsidies. If she is liquidating assets to meet her living expenses, the income generated will obviously depend on the basis of those assets, but if a “millionaire” has a diversified portfolio of assets, some appreciated, others perhaps being held at a loss, the taxable income (MAGI) generated by those asset sales can be managed, and I believe it is ethical to do so. If your sister is living on interest income from tax free municipal bonds, she may avoid federal income tax but that income will be included in her MAGI for purposes of determining ACA subsidy eligibility. </p>
<p>So it really all depends on your sister’s financial situation. All we know is she is a “millionaire” and pays property taxes on a $2mm house.</p>
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<p>IDK, some people have savings? Downsize your house? Had a rich uncle who met untimely death? They spent $100K buying up stocks that appreciated to $110K when you sell. Your profit or taxable income is only $10K although you have disposable cash of $110K. That’s why it’s a big deal to exclude assets.</p>
<p>You don’t need to single out bay’s sister. It may serve as an example but that is not an uncommon situation and we can generalize to include many.</p>
<p>"Lots of people have assets that are not sheltered in any way. "</p>
<p>I think we are going around in circles here.</p>
<p>Igloo said get 100k to spend from securities with only a tax burden of 10k which makes it subsidy eligible.</p>
<p>I am suggesting that if I made a profit of 100k with a tax burden of 10k, technically I still have an income of 100k when someone looks at the bottom of the first page of 1040 because that’s what it will show when I have a 100k profit.</p>
<p>If 100k is not the profit, then this discussion is moot.</p>
<p>“bigger question that many would ask is how do they get their assets into IRA accounts so they can shelter them from taxes.”</p>
<p>There is no need to. Holding stocks in a taxable account is not used to determine eligibility for subsidies.</p>
<p>Bay, you might be right that per capita cost for Medicaid will go down with the expansion, except that many people won’t sign up for Medicaid until they need it. Unlike other health insurance, I am pretty sure you can get Medicaid retroactively – so a hospital social worker can work with someone who has been admitted or about to be discharged, and gather the information needed to qualify. I think that’s why the exchanges are asking applicants whether they have current unpaid medical bills – because if they do qualify for Medicaid, there may be a way to pay for some of those. </p>
<p>There is a time limit on how far back the retroactive payments can go - I think a maximum of 3 months – but you might see a bump in overall costs at the beginning, given that people with accumulating medical bills will be the ones with the highest motivation to sign up right away.</p>
<p>To repeat the hypothetical, because it was many pages back:</p>
<p>A couple who lives in Georgia has an adult son, 27 years old, with Aspergers. This young man is unemployed and, in this economy, has little chance of being employed. Moreover, he takes various prescription medications for his condition. </p>
<p>The son is too old to be on his parents’ insurance. Georgia didn’t expand Medicaid, so he can’t go on Medicaid. </p>
<p>I asked if it would be legal for the parents to employ their son for $12,000 a year, to bring him up to the level where he would be eligible for premium subsidies and copay subsidies on the exchange.</p>
<p>Most posters here concluded it would indeed be legal.</p>
<p>“Igloo said get 100k to spend from securities with only a tax burden of 10k”</p>
<p>Texas, I believe igloo said 10k of taxable income, not tax</p>
<p>Most of Medicaid’s payments go to the “dual eligibles,” people who are also eligible for Medicare. Putting younger poor people on Medicaid will make the per capital expenses plummet.</p>
<p>Cf, did he perform any work for the $12,000?</p>
<p>GP, the tax auditor is looking at claimed deductions. </p>
<p>In the case of CF’s friend, there was no money being deducted or expensed from a business. The parents would be hiring the person for their own benefit, in the same way that they might hire a gardener or a housekeeper.</p>
<p>$100K is not the profit, it’s the proceed or sales price…</p>
<p>CF, I don’t think it’s legai unless the son works to justify the earning. It may however be “defensible”. If the son gets $12,000 without doing anything, it will be a gift and not a taxable income and won’t help.</p>
<p>calmom, I am not sure helping around the house counts. i know it doesn’t count if a spouse. Not sure about a son. I believe the relative has to be involved in income producing activities. If you are a landscape contractor and take your son to help you out in working someone’s else’s yard to get paid, that counts. The law may have changed. In old days when non-working spouses were not allowed to contribute to an IRA, there were many discussions like this. IRA ruled nonworking spouses can’t be paid for helping around house and make a deductible contribution to IRA.</p>
<p>“In the case of CF’s friend, there was no money being deducted or expensed from a business.”</p>
<p>True, but the income will get this son govt subsidies. So I would expect for this to be characterized as income, some legitimate work would have to be performed in exchange for the money.</p>
<p>People who are disabled and qualify for SSI may allowed to remain on their adult parents insurance policies. The parents need to check with current insurer. I know several folks in this situation.</p>
<p>Cf, I’m sure it would be legal if the parents owned some sort of business and he actually did work for it. Why not? An easy way that people do this is by having rental properties, and having their child do work in that capacity. There can be plenty of work with rentals.</p>
<p>“Most posters here concluded it would indeed be legal.”</p>
<p>Right, as long as he’s doing real work. Most folks with Asperger’s can do yard work, housekeeping, data entry, etc. – their challenges come from their relationships at work, not from the tasks at work.</p>
<p>NJ,
My point in bringing up my sis, even without complete details of her situation, was because I wondered whether anyone in real life in her ostensible situation (unemployed, high property tax bill, minor son living at home, enough income being generated to pay her bills currently) could actually structure themselves to take advantage of government subsidies, (including Medicaid). It looks like there are several ways in which this could be done. If she has a good financial advisor, I would expect him/her to include looking at medical expenses and maximizing savings in that arena when planning. It would make sense.</p>
<p>It is legal. </p>
<p>I was concerned about a business being treated like a hobby, but that isnt the case here.</p>
<p>Records need to be kept.</p>
<p>There is a rule. The arms length transaction. I dont see how this rule would come into effect in this example.</p>
<p>CF, Didnt you say the kid couldnt work? Or couldnt get a job? What did you say? Why cant the kid qualify for SSI?</p>
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<p>The relevant IRS code section is 267 ([26</a> USC § 267 - Losses, expenses, and interest with respect to transactions between related taxpayers | Title 26 - Internal Revenue Code | U.S. Code | LII / Legal Information Institute](<a href=“http://www.law.cornell.edu/uscode/text/26/267]26”>26 U.S. Code § 267 - Losses, expenses, and interest with respect to transactions between related taxpayers | U.S. Code | US Law | LII / Legal Information Institute)) and it refers to deductions from " any loss from the sale or exchange of property" between related parties, not wages. </p>
<p>IRS auditors look for matching transactions: that is, if a business owner deducts wages paid to employees, there will be W2’s filed that match the amount of wages paid. If the business owner deducts large fees for services to independent contractors for services rendered, there should be 1099’s. </p>
<p>Again, CF’s friends are not business owners and would not be deducting the expense. Even if they were, a claimed wage of $12,000 a year could not possibly be claimed to be improper unless it were shown that the money was not actually transferred or that the person in question did not exist or was not legally capable of working (such as a relative who is incarcerated or an undocumented immigrant). $12K is less than minimum wage for a full time job. It is legal for businesses to employ people to do things that require minimal skills. </p>
<p>$12,000 equates to $230 per week. Here is a web page with the going rate for dog-walking where I live: [Dogwalks.com</a> Dog Walking Service for San Francisco | Pricing](<a href=“Dogwalks.com - Dogwalks - SF dog walking contact info”>Dogwalks.com - Dogwalks - SF dog walking contact info) </p>
<p>I mean, the parents could hire the kid to walk their dogs twice a day at $20 for each walk, and it would be a fair rate and net the kid $14,400 over the course of a year.</p>
<p>Unless the law has changed, the kid has to be involved in income producing activities not just help out around the house. If the dad owns a doggie center and the son walks dogs boarding there, that would qualify.</p>