TAX: Federal Gift Tax Flashcards
This has nothing to do with Income Taxes?
True!! This section is unrelated!
The estate and Gift tax are apart of what tax?
Unified transfer tax- when someone passes their wealth on to other individuals
Gift: If you’re still alive
Estate: After death, estate applies
These are progressive taxes
why is the gift tax levied on the donor (giver of the assets)?
The only reason is because there is an estate tax. If you didn’t have the gift tax and they knew they were going to die, that individual would escape the estate tax.
For the estate, it is the decedents estate that would pay
What is the united credit?
Used to reduce the gift tax or estate tax.
$11,000,000 worth of property can be transferred without any tax (it is 11,000,000 in total not for each gift and estate)
What is a trust? How is it set up?
If you form a trust for the benefit of your children, you may put property into the trust (called corpus) the income from that property, would go to the income beneficiary.
Compare to a tree:
Individuals can come take the apple from the tree, the income interest is separate from the property interest
When a gift is made, the gift is taxed at what value for tax purposes?
FMV
What is the annual exclusion for gift taxes?
$15,000 per individual (you can give $15,000 to 4 different individuals and not have to pay gift tax)
What is gift-splitting?
The owners of property (two spouses) can use $15,000 exclusion EACH. Total of $30,000.
What type of assets are subject to gift tax?
Cash or property
Debt Forgiveness
Sales at bargain prices to family members
Loans to family members at a below market interest rate
Transfers property into a trust
What items are not included in gift tax?
Any item given to a spouse
Charities
Political organizations
Education expenses paid directly to the university (ONLY TUITION, NOT SUPPLIES/BOOKS/DORM FEES)
Medical expenses paid directly to the medical provider
Donation of time or personal services
Any transfer that can be revoked
Payments to employee for personal services (wages)
Property settlements for a divorce
