Tax Law (Questions About Taxes)/gifts/follow-up

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Question
QUESTION: If I give someone over $13,000 as a gift, who pays federal income and Ohio state income taxes on the gift--me, the individual receiving the gift, or both?  Thank you.

ANSWER: Ann,

Thanks for your question.

Actually the annual exclusion has risen to $14,000.  The donor pays the gift tax.

However, in addition to the annual $14,000 exclusion, there is a $5,250,000 lifetime exclusion.  If your gift exceeds the $14,000 amount you must file a gift tax return, but there would be no tax as long as you have not used up the exclusion.

The recipient will only pay tax if they sell the property for an amount greater than your basis in the asset).  That would be income tax on the gain over basis.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Does the exclusion include gifts under $14,000?  For instance, I gave away gifts of cash to various individuals ranging from $1,000 - 12,500 and paid taxes on all of them.  Should I have used the exclusion?

Personal note:  I hold a Master of Arts degree in English and read the gift tax rules on the IRS site repeatedly and completely missed any mention of this exclusion.

Answer
You can give up to $14,000 in gifts to an unlimited number of persons each year and it will be excluded.  For this purpose the total of gifts to a particular person is the operative number.  

For example, you could give $14,000 to 100 different people and not be subject to filing.  

You could give a gift of $10,000 and another of $5,000 both to the same person and would need to file as that person received more than $14,000 from you during the year.

Since no person received more than $14,000, you are not subject to gift tax or gift tax filing. If you paid gift tax on those, that was in error and you should file an amended Form 709.

However, I just noticed your original question and you asked about income tax.  Gifts are not an income tax item.  You don't get an income tax deduction for them and the donee does not report the income.  I did not make that distinction clear.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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