Gift letter is a correspondence that explicitly states that money attached to it or send other way is a gift. The gift letter is often used in case of down payment (e.g. when buying real estate property). The letter states that received money is not expected to be paid back.
Usually lenders want borrowed money back after some time. But in case of gift letter, the lender resigns from receiving money back. In order to be valid, the gift letter must be written directly by the giver.
Most of the countries regulate rules of giving the money. In some cases it is a cap over which the tax applies. In other cases the tax applies always, but it that case it has usually lower rate. Some types of gifts (e.g. between close family) can be excluded from tax. The legislation is different in every country, so it should be checked before performing the action.
- Mortenson, T. G. (1990). The Impact of Increased Loan Utilization among Low Family Income Students.
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