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Gift
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Definition
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A transfer of property from a donor to a donee for no payment, or a transfer
worth less than the property's fair market value.
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When Does It Apply?
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A gift must be voluntary and complete for legal and tax purposes.
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How Does It Operate?
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Donor makes a transfer of property, property is accepted by the donee, and
donor retains no control over the property.
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Advantages/Disadvantages
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Advantages - substantial tax savings are possible by making gifts.
Non-tax advantages - seeing the donee(s) enjoy the property; donor's freedom
from property management.
Disadvantages - loss of control over the property.
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Estate/Gift Tax Implications
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Gifts exceeding $10,000 annual exclusion, as indexed, are added to the
tentative tax base before the estate tax computation at death.
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Income Tax Implications
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Future appreciation in property value is removed from the donor's estate and
will be taxed to donee if sold.
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Other Considerations
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Marital deduction lets one spouse give unlimited amounts to the other with no
gift taxes. $10,000 annual exclusion, as indexed, for a gift is exempt from the
federal gift tax.
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