Gift Tax General Q & A

Many individuals wish to gift property and money to their friends and family and have questions regarding these gifts and the tax matters & implications associated with gifting.  The article below has been drafted to provide general information regarding gifting and the tax implications.

 

Who will pay the gift tax?

 

Generally, the person gifting, the donor will pay any necessary gift tax.  Under certain circumstances the donee may agree to pay the gift tax.

 

What is a gift?

 

Any time that money or property is transferred to an individual, whether it be directly or indirectly and full consideration is not paid, is a gift.

 

Is there any transfer or type of gifting that can be excluded as a gift?

 

Generally, any gift is taxable under the current law, but there are many exceptions to this rule.  Some of these exceptions are: gifts that do not exceed the current annual exclusion; gifts to a spouse; and, when tuition or medical expenses are paid directly to the provider for another person.  Additionally, gifts to qualifying charities would not incur gift tax.

 

Can I deduct the gifts on my individual income tax return?

 

Gifting money or property to friends and family does not necessarily affect your federal income tax return because you cannot deduct the value of a gift that you make unless the gift was a charitable contribution.  You can read Publication 559 regarding gift and estate taxes

 

How many annual exclusions do I get?

 

The annual gift exclusion applies to each donee.  Thus, in 2014 you could give every family member and friend $14,000 without incurring any gift tax.  If you are married, you and your spouse can gift property you own together and essentially double the gift amount to each individual.

 

What is Fair Market Value (FMV)?

 

FMV is defined as, the price at which a willing buyer would pay and a willing seller would sell under no compulsion to buy or sell the property and both parties having reasonable knowledge of all relevant facts to the property.

 

The fair market value of a particulate piece of property that is included within a decedent’s estate is not reduced by a fire sale or forced sale price.

 

What if I sell the property and what is my basis in the property?

 

Generally, your basis in property that is gifted to you is a carryover basis from the donor.  For example, of you were gifted stock of which the donor what a $15 basis in, your basis would be $15.  Thus, if you sold the stock for $25, your gain would be $10.  When you inherit property from an estate, your basis is stepped up, meaning you take the property with a basis at current value.

 

Does the marital exclusion apply to a married same sex donor that transfer property to his or her spouse?

 

The terms “husband,” “wife,” and “spouse” include individuals of the same sex who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals that are the same sex, and who remain married.  Thus, the gift tax marital deduction can apply to same sex couples.

 

You can contact The McGuire Law Firm to discuss gift tax related questions with a tax attorney.  Law offices in Denver and Golden Colorado, and  free consultation is provided to each potential client.