What is a taxable gift?

I know that the Federal (and state) governments impose a tax on gifts exceeding a certain amount, but exactly what constitutes a "gift" for tax purposes?

Parents routinely support their (minor) children, providing food, clothing, housing, medical care, educational expenses much more than the $12K/year limit for non-taxable gifts. Yet I've never heard of the government demanding a gift tax return for this sort of thing.

Even after the child reaches adulthood, the parents may allow the child to live in their house. Parents also routinely: . pay for their adult child's educational expenses, which can easily exceed $100K/year . pay medical expenses for an adult child, especially one living in the parents' home . allow the child the use of a car that belongs to the family, rent free. (The adult child may or may not be required to pay for gas and/or insurance.) . give the child the "discarded" (1-2 year old) family car when they buy a new car. . give the child an "allowance" or "pocket money"

At what point does a freewill gift to a child become a "gift" for tax purposes?

A similar question could apply to unmarried couples living together (either because they choose not to marry, or because state "Defense of Marriage" laws prevent them from marrying). A person may give substantial "in kind" gifts to a domestic partner, or even spending money. But AFAIK nobody requires them to file a gift tax return or report it as income (payment for homemaking services, etc.)

Any comments on the specific rules governing this? Or is it just a matter of a lot of stuff going on "under the radar"?

Reply to
Barry Gold
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Well, the gift tax law specifically provides that medical or educational payments made by the "gift" giver directly to the medical or educational institution do not count as gifts for gift tax purposes. So if Granny writes your tuition check straight to Hahvahd, no gift. If she writes it to you, gift.

See above.

I'll bet that's a gift.

That's a gift for the FMV of the car.

That's a gift (so are Christmas and birthday presents).

I'd say a freewill gift is a "'gift for tax purposes'" right off the bat.

I would posit that: (a) under the law, pretty much everything you'd consider a gift is a gift under the tax rules. (Aside from "gifts" from employers.) (b) enforcing it is pretty much impossible except for when money or titled property actually changes hands. And even then it's probably pretty hard.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Reply to
Rich Carreiro

Until a child is emancipated (see state law to see at which age emancipation takes place) the parents have an obligation to provide support. That support is not considered gifts. Once the child is emancipated, then whatever the parents provide their child other than direct payments to providers of medical services and institutions of higher learning is a gift and falls under the Gift Tax rules.

Gifts between spouses are unlimited. Gifts between adults whether they cohabitate or not fall under the Gift Tax rules.

If you are asking whether the government is actively tracking down the dude who gave his girlfriend a $25000 diamond bracelet and didn't file a gift tax return.... the answer is no unless they are actively auditing that individual for some other reason and the gift comes to light. Ditto for gifts between parents and their children.

Reply to
Alan

If the spouse giving the gift is a US citizen and the spouse receiving the gift is not, there is a limit. In 2008, it looks like the limit is $128,000.

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If the spouse receiving the gift is a permanent resident, then I don't know if the above applies.

Reply to
removeps-groups

It only applies to a spouse who is a nonresident alien. Lawful permanent residents are treated the same as citizens.

Reply to
Alan

Does this imply that many, maybe even most, gift tax returns are wrong, and that the donors may not realize that they've perjured themselves in signing the returns?

I mean, birthday presents that're worth let's say a coupla hundred bucks, if left off a gift tax return could put the donor in harm's way if the IRS were doing its job more diligently???

Reply to
lotax

No, since one must know one is stating a falsehood in order to commit perjury.

Reply to
brownwp

What about the ones that know, should know, have every reason to know, and - more my point, I guess - the preparers of the returns? You've described the "innocence" of the ones that don't know what they don't know. What about the others?

Reply to
lotax

Can you cite supporting sources?

My impression is that LPRs are treated like NRAs for estate and gift taxes, and have limits on both gifts and inheritance. The usual remedy is a QDOT.

Reply to
simon_baldwin

The actual rule is state in §2523 of the IRC. It says that gifts to non-citizen spouses are not granted the unlimited deduction of gifts to citizen spouses. There is no exception for permenant residents.

However the rule may have been different in the past. Under the regulations, §25.2523(a)(1)(a), it says,

"In the case of gifts made prior to July 14, 1988, no marital deduction is allowed with respect to a gift if, at the time of the gift, the donor is a nonresident not a citizen of the United States. Further, in the case of gifts made on or after July 14, 1988, no marital deduction is allowed (regardless of the donor's citizenship or residence) for transfers to a spouse who is not a citizen of the United States at the time of the transfer."

Stu

Reply to
Stuart A. Bronstein

Looks like I screwed the pooch on this one.......

Reply to
Alan

Don't feel bad - everyone makes a mistake now and then.

Even me! Remember that time I thought I'd made a mistake? Turns out I was wrong. ;-)

Stu

Reply to
Stuart A. Bronstein

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