Tax Tip: Gift Taxes
Taxpayers who have given gifts exceeding $11,000 in value to a single individual must report the total gift amount to the Internal Revenue Service (IRS). The giver may owe taxes on the gifts. The recipient, however, does not have to report or pay taxes on the value of the gift, according to IRS Tax Tip 2006-14. Individuals who need to file a gift tax return should use Form 709:United States Gift (and Generation-Skipping Transfer) Tax Return.
Gifts include money and property. If someone uses property and the owner of the property doesn’t expect to receive
something of equal value in return, that is also a gift. Selling something for less than market value of making an interest-free or reduced interest loan may also be gifts. Tuition or medical expenses paid directly to an educational or medical institution, however, are not gifts. Gifts to spouses who are U.S. citizens, charities, and political organizations do not count against the annual limit, either.
The limit for gifts given to spouses who are not U.S. citizens has been increased to $117,000 this year.
Other changes occurring this year affecting gift taxes include: filing Form 8892, Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax. Predeceased parent rules used to determine an individual’s generation assignments for certain transfers occurring on or after July 18, 2005 have been amended. The lifetime exemption for generation-skipping transfers (GST) remains $1.5 million.
Tax preparers should also be aware that husbands and wives cannot file a joint income tax return. Community property given as a gift is considered to be two gifts, each representing half the value of the property, given by both individuals.
Finally, only individuals are required to file gift tax returns. Individual beneficiaries, partners and stockholders may be liable for GST if their portion of a gift given by a trust, estate, partnership or corporation exceeds the $11,000 value limit.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.