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Advice on Annual Gift Tax Exclusion

Find more information about Annual Gift Tax Exclusion at the best oniine resource site Teen Analyst.

Q: What was the annual gift tax exclusion for 2006?

A: $12,000

Q: Is lending money subject to the gift tax?
Instead of going through a bank, my parents are thinking about lending me the money to purchase a $30k house. We are doing this because the house needs work and the banks do not want to loan to me. I will pay them back $500 per month for 60 months, or until the money is completely paid back.

Is this subject to the gift tax (because it exceeds the Gift Tax Annual Exclusion)? Are there any other tax issues that my parents or I should consider?

A: Please read the attached (2 page) article…I believe it fits the exact circumstance you outline – especially the last few paragraphs which address using the “non-interest” as a gift.

http://www.rfpj.com/documents/Making%20a%20Loan%20to%20a%20Family%20Member.pdf

Q: Can I gift prop. to children in increments (under annual exclusion amount) and not fill out gift tax form?
How, then, is this gift and incremental transfer of property officially recognized?

A: You need to see an attorney experienced in such matters. Yahoo is not the place for advice on something like this.

Q: Question RE avoiding gift tax and estate tax?
Question RE avoiding gift tax and estate tax.
Can a person form a legal entity with an administrator?
And have the entity open an interest bearing bank account. And put in that account $50,000,000.00

And instruct the administrator to annually distribute to 2 people and there children the maximum amount of money Before the gift tax would kick in(lets forget about tuition and medical expenses for now). So that would be The unified tax credit (currently $1,000,000) plus the annual gift tax exclusion (currently $12,000) divided equally among the receivers for the first year.
And for every year after that the administrator would distribute any increases in The unified tax credit plus the annual gift tax exclusion. To be Divided equally among the receivers.
Could this legal entity survive and continue its annual distributions after the givers death?
Would there be any tax consequences upon the givers death?

A: You’re generally describing a Trust. However trusts cannot give gifts to individuals; only individuals can give gifts to individuals. Any income generated by the trust is subject to tax. The tax can either be paid by the trust or the beneficiaries.

As a tax avoidance tool, trusts have limited value. The key value is expediting the probate process. The trusts assets are not subject to distribution through the probate process but the value of the assets are included in the value of the estate for determining the Estate Tax due.

Q: If I loan my sister $20,000, is it subject to any tax? Gift tax?
I wrote my sister a check for $20,000 to her bank account and she cashed it January 2009. The money was meant as a loan to help pay off some credit card debt. Is the amount taxable? Can I take back $8,000 from her, and then consider the remaining $12,000 as tax-free under the annual gift tax exclusion for tax year 2009? I wrote and gave her the check in December 2008, but it wasn’t deposited into her bank account until January 2009.

A: If she has already accepted it, then no.

Q: How much land value can be deeded to me before I have to pay a gift tax?
The info I found on the IRS website says effective Jan 1, 2009 the annual exclusion on the gift tax is $13,000. Is this correct? Is that true for an individual and a married couple or can each partner receive the annual exclusion? This has to do with my parents giving my wife and I some land.

A: Receiving a gift is NEVER taxable. Even if it’s a million dollars.

The GIVER will have to pay the tax on it. It’s $13,000 per individual. So they could give you and your wife each $13,000 before having to file a gift tax return.

Q: Is there a penalty for filing a gift tax return late if there are no taxes due?
My deceased father (died in 2006) failed to file gift tax returns for several years reporting gifts that exceeded the annual exclusion amount. I (as POA for my mom) want to file all of those past-due gift tax returns now. Does the IRS charge a late filing fee or penalty, even though there will NOT be any taxes owed?
Gift tax returns DEFINITELY must be filed, since the value of the gifts exceeded the annual exclusion amount!!! I’m talking about GIFT taxes, not income taxes! I just don’t know if there will be a penalty for not filing them when they were supposed to have been filed!

A: if there are no taxes owed, you don’t even have to file. if they owe you money, you have 3 years to file.

Q: Edgar is interested in setting up an irrevocable life insurance trust, but he wants to be sure that any gifts?
Edgar is interested in setting up an irrevocable life insurance trust, but he wants to be sure that any gifts he makes to the trust to pay the insurance premiums will qualify for the gift tax annual exclusion. Which of the following techniques will help him accomplish that objective?
A) QTIP election
B) Alternate valuation date
C) Crummey powers
D) Estate freeze

A: A. But if you want to PASS that test, you need to know WHY.

Q: Gift tax question in Illinois?
My parents gave me and my husband $26,000 in May 2007, to help us out after the purchase of our new home (note: this money did not go towards the down payment or any of the closing costs). This money was used on home repairs. My mother passed away in December 2007. I’ve reviewed the gift tax info on the IRS website. If I understand it correctly, the annual exclusion for gifts given by a couple would be $24,000 (since it was given to us in 2007). Since the donor is responsible for paying the gift tax, will my father have to pay taxes on the difference (approx $2000), or can the $2000 difference be applied toward the lifetime exclusion amount ($1 mil)? Will we have to claim the gift on our income taxes? I know it seems terrible to think of money at a time like this, but I’d rather not have any more surprises: my mother had no will, and my parents hadn’t set aside any money for funeral costs. Thank you.
WOW, all great answers. Thanks for the prompt replies. You guys are the best.

A: He should technically file a gift tax refurn, yes, but you are right that the 2,000 will go towards your annual lifetime exclusion of 1 million. The 1 million exclusion is also related to the estate tax (which taxes estates over 1 million.) The gift tax is just basically a way to prevent the loophole of a super rich person from gifting away their estate right before they die and then avoiding that tax. So what ends up happening is now when he dies anything you inheret over 998,000 is taxed (in a nut shell). Hope that makes some sense! But definitely no ones going to end up oweing any tax in this one instance.

Oh, and just to point it out one major tax planning strategy for the rich is to gift up to the max every year…. so if your dad is indeed super rich and wants the money to go to you guys before he dies he should start giving you 24,000 a year (this is what the super rich old people do.)

Q: Do I have to file a gift tax return if my wife and I gave $48k total to my daughter and son-in-law?
My wife and I gave a total of $48,000 in 2008 to my daughter and son-in-law. I’m aware that the annual exclusion for not having to report gifts is $12k per each person you give a gift to. In this situation, being that there are four total people involved, can we say that I gave $12k each to our daughter and son-in-law, and my wife gave $12k each to our daughter and son-in-law for a total of $48k? In that case, would we have to file a gift tax return or is this considered gift splitting?

Thanks.
I signed the check b/c my wife and I have a joint account from which the money came from. The check was made to both Jane and John Doe.

A: Have fun doing the two mirror image 709 forms. You won’t owe tax (or even use up any of your lifetime gift exclusion), but you need to do the gift splitting for two reasons, joint funds and two givers.

If you had written two $12K checks from *separate* funds and your wife had written two $12K checks from *separate* funds, you wouldn’t be filing anything. If you had written two $24,000 checks from separate funds, you would be doing one 709 and having your wife sign that she was gift splitting.

From instructions:

If a gift is of community property, it is considered made one-half by each spouse. For example, a gift of $100,000 of community property is considered a gift of $50,000 made by each spouse, and each spouse must file a gift tax return.

Likewise, each spouse must file a gift tax return if they have made a gift of property held by them as joint tenants or tenants by the entirety

Q: gift tax question? Cant they make this any easier…?
If I got a money from a friend for $100,000. They would take $100,000-$13,000=$87,000 ( the annual exclusion). Now, the $87,000 would be taxed, however, say that tax was (making up numbers) $20,000. Now, that $20,000 would be taken off my friends 345,800 (if this was his first time given money to another person. My friend would owe no taxes at the end of the year, but would now have only $325,800 to give to people as a gift or as estate money or gift money? Is this right?

A: He’d have used up $87,000 of his “lifetime” $1,000,000 gift exclusion.

That leaves $913,000.

The gift tax on that first $1,000,000 is $345,800. The unified credit is what he would be nibbling away at.

Q: Slight confusion on Federal GiftTax?
In 2010, the gift tax exemption is $1M and the annual exclusion is $13K. Does that mean that a single gift of $1M can be made w/o tax and, e.g., add’l gift or gifts of $13K (per person)could also be made tax free?

A: The $1 million exclusion is a lifetime exclusion…the $13K is the yearly exclusion to any one person (you can give multiple $13K gifts). Let’s say you want to give someone $20K – you can either give the person $13K this year and $7K next year or you can give the person the entire $20K, use the $13K yearly exclusion and then use $7K of the $1million lifetime exclusion. This means that the following year, you still have the $13K exclusion for that person, but your lifetime exclusion is now down to $993,000.

The downside is that by using a part of you lifetime exclusion, you reduce the amount of estate that is tax free by a similar amount, so in the case above, you tax free inheritance limit would be reduced by $7k.

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