Taxation of Property Received as a Gift Flashcards
Is there an income tax effect on the receipt of a gift?
NO
What happens if there is the Sale of a Gift that is:
Above the Previous Owner’s Basis
If a gift property is sold by the recipient for more than the previous owner’s basis, the difference is a taxable gain to the person making the sale.
What happens if there is the Sale of a Gift that is:
Drops in value below previous basis
The sale could create a loss even though the seller never paid for the item.
= Proceeds from Sale - Lower of the Owners Previous Basis / FMV @ Date of Gift
What happens if there is the Sale of a Gift that is:
REBOUND: when the sales price is below the previous basis, then rebounds back above
No taxable gain or loss.
What is the holding period for gift property?
- If you get to use the prior owner’s basis (gains), then you also use the prior owner’s holding period.
- If you don’t get to use the prior owner’s basis (losses), then your basis starts on your first day of ownership.
Gift Tax Exemption for The Donor
Although no tax is paid by the recipient, the DONOR may have to pay gift tax if the gift is greater than $15,000 to any one person.
*Married couples can give away $30,000 without a gift tax.
Gift Tax Exemption - in what cases can you give more than $15,000?
If you are paying
MEDICAL BILLS
TUITION (not room and board) (MUST BE PAID DIRECTLY TO COLLEGE)
GIFTS BETWEEN SPOUSES ARE TAX FREE
Business Deductible Gifts to customers are limited to:
$25 per customer
Business deductible gifts to employees:
Excluded up to $25, as long as gifts are not cash or gift certificates
Would the sale of an inherited property be S-T or L-T?
Long-term holding period
Basis for Inherited Property?
Inherited property is assigned FMV at the date of death
“Step up basis”
What does the word conveyance mean?
The day that inherited assets are received
The executor of the will can choose an alternate date to value all the assets. What date is this?
Either the date of death, or six months after.
*If any property is conveyed during the 6 months, value is FMV on date of conveyance.
When property is received as a gift, and property is sold for ABOVE the donor’s basis, what is the holding period used?
Gain, receive the holding period of the donor
Property purchased from a RELATED PARTY, what is the holding period?
From the date of purchase
