With the gift and leaseback, you will need a legitimate non-tax reason for this transaction. Obtain a letter from a lawyer stating that this transaction is recommended:
The parents shifted $5,000 of income to their child by using a gift and leaseback. Since the parents income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%). Since the childs taxable income was taxed at the 0% tax bracket, there may be no tax on the income. Therefore, because of the income shifting, the total family tax savings may be $1,500.
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by using a gift and leaseback to shift income to your child.