Gifting

Question 1

Gift

Answer 1

completed transfer of a interest in a property by an individual in exchange for less than full and adequate consideration in money or money’s worth during the transferor’s lifetime (inter vivos)

Question 2

Requirements for a valid gift

Answer 2

1. donor must be legally competent
2. donative intent on behalf of the donor
3. actual, or constructive, delivery of the gifted property to the donee or the donee’s legal representative (i.e. guardian of a minor)
4. valid acceptance of the gift by the donee (donee is capable of receiving property)

Question 3

Federal Modifications gift tax requirements

Answer 3

Donitive intent not required to be subject to gift tax

Gift must be a complete gift -no power to change, control or enjoy

Question 4

Gift Loans

Answer 4

an interest-free loan to another
may create a taxable gift
the gift is the amount of interest that would normally have been charged on the loan
gift of the interest does qualify of the annual exclusion

Question 5

Appropriate gift property

Answer 5

Highly Appreciated Property - Charity or donee in low tax bracket - may want to keep until death to get a step up

Property likely to appreciate - Good gift to remove future value from estate

Income Producing Property - only if DONEE is in low tax bracket

Loss Property - Sell instead of gift..gift cash

Out of State Property - Always gift..avoid ancillary probate.

Depreciation Property - Keep..take full depreciation

Life Insurance - Excellent to gift.

Question 6

Closely Held Business Owners

Answer 6

FLP- gift business interest to family members

LLC -Gift closely held stock - be careful! May disqualify section 303 or 6166

• Gift fully depreciated property to family-lease payment by business to family is a deduction
• reduce the value of business interest in estate

Question 7

Annual Exclusion

Answer 7

PRESENT interest gifts 14,000

• exception 529
• some trusts

Question 8

Gifts to Non- Citizen Spouses

Answer 8

$148000

Question 9

Gift and sale Basis

Answer 9

Sell Gain

Donors basis————-$50000

Sell between $25000-$50000 =no gain or loss

FMV date of Gift———$25000

Sell Loss

Question 10

Gifts Subject to Indebtedness

Answer 10

Only the net value of the gift is subject to tax

If debt is greater than the cost to donor =taxable gain

• gift tax paid within 3 years of death are a credit against tentative tax

Question 11

Joint Property

Answer 11

-bank act no gift until withdrawal of funds donee

us savings bond - gift arises when bond is redeemed. Redeemed by initial purchaser- no gift

Question 12

Deductible Gifts- 0$ tax

Answer 12

Payments directly to educational institution
Payments to a medical provider
Spousal gifts
Gifts to charity
Gifts to political organization for it’s use
Gifts to President of US