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"?