Let us create a 3D eBook for you!
Let us create a 3d Digital eBook for you! DigyCat.com

The Annual Gift Tax Exclusion: Getting The Edge


Whether helping the kids with a down payment on their first home, paying the premiums on a life insurance policy in an irrevocable trust, or moving appreciated assets to a younger generation, annual gifting will touch the lives of millions of Americans. But before the transfer is made, an investor should spend some time looking at the investment and the tax ramifications of the property to be passed.

Much of the gifting itself will be done under the Annual Gift Tax Exclusion, a method that alleviates both a gift tax and the need to report the transfer. This exclusion applies to gifts only between individuals. Gifts made to charities and other organizations fall under a completely different set of rules.

The transfer is not deductible by the donor nor is it taxable to the recipient. Currently (in calendar year 2005), the annual exclusion is set at $11,000. In the future, this can be adjusted for inflation, but only in $1,000 increments. Spouses can increase their gifts to others to a maximum of $22,000 and, finally, gifts between spouses, like love, knows no limits.

Most transfers are done for one of two reasons. In the past, passing along property to diminish the value of an estate and, therefore, estate taxes was a major consideration in estate planning. This is still used extensively for larger estates but, under current law, fewer estates are subject to the tax. If the estate has no tax exposure (and if nursing care is taken care of), many advisors recommend not to gift at all but, instead, toallow the assets to receive a "stepped up" tax basis upon death.

Gifting to allow for current use of assets has been and continues to be popular. Often a parent wants to see a child use the gift immediately in order to enjoy an extended vacation or to make a major purchase. Here, it is expected that any gift of securities will be converted into cash with the appropriate tax paid.

Both donors and recipients should be aware that various gifts for educational or medical purposes may not reduce the annual exclusion. You should check with your tax advisor to determine whether this applies to a your specific situation.

Certain kinds of property (real estate, art, collectibles, closely held business interests, etc) should be appraised before a transfer is made. Consulting an expert in the particular field is usually a good idea to calculate the fair market value of the property.

Another circumstance requiring professional help is when "spending down" an estate for Medicaid purposes. An elder law attorney should be consulted for help in this area.

The actual gift of marketable securities or cash is fairly straightforward. Giving a check to someone or journaling over securities is enough to complete the gift. However, before making the gift, you should understand some of the potential tax considerations.

Let's first look at stock that has appreciated in value. Remember, whatever tax basis the donor in the gifted property will become the recipient's tax basis. If the donor is in a higher tax bracket than the recipient, it is often wise to gift the stock to the recipient and let the recipient sell the stock at his or her lower tax bracket.

If the fair market value of the stock is below the donor's original cost, then the donee must use the fair market value of the property as of the date of the gift in determining his or her tax basis. If you find yourself in this situation, the donor should consider selling the asset and then gifting the cash proceeds to the recipient.

Obviously, there will be times when a gift needs to be made regardless of the consequences; but, when time allows, you should do your homework to see what works to your best advantage.

Glenn ("Chip") Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business. He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him by email at dahlkefinancial@sbcglobal.net. You may also contact him at the Living Trust Network's web site at http://www.livingtrustnetwork.com

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved.


MORE RESOURCES:

Taxes - Google News

This RSS feed URL is deprecated

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

The case for a junk food tax - Vox


Vox

The case for a junk food tax
Vox
Some kind of government intervention in the food environment probably has to be part of the solution. Taxes have been an effective, though still controversial, approach to curbing the consumption of tobacco, alcohol, and soda. Now researchers from New ...

and more »

4 things to know about the new US tax law - Yahoo Finance


Yahoo Finance

4 things to know about the new US tax law
Yahoo Finance
Under the old tax code, the average family of four (that submitted taxes married-filing-jointly) received a tax break of $16,200 through the personal exemption, one $4,050 exemption for every member of the family. That's gone now, but in its place the ...
Gig-job workers had better beware of pay-as-you-go tax payments CNBC

all 2 news articles »

9 Ways the New Tax Law Affects Millennials - Investopedia (blog)


Investopedia (blog)

9 Ways the New Tax Law Affects Millennials
Investopedia (blog)
The new tax law, the Tax Cuts and Jobs Act, has generated significant buzz as tax experts speculate on how the average American's tax bill will be affected. Some of the most important changes center on key deductions and credits that could have a ...
Ask The Taxgirl: Claiming A Tax Refund When You Owe Tax Forbes
Here's the First Day You Can File Your Taxes This Year Motley Fool

all 81 news articles »

Phone, hotel taxes likely to rise in Naperville - Chicago Daily Herald


Phone, hotel taxes likely to rise in Naperville
Chicago Daily Herald
"From my perspective, especially with the new federal tax law that caps state and local taxes at a $10,000 deduction, it makes a lot of sense to look for alternative revenue streams other than property taxes," Mayor Steve Chirico said. "I think these ...

Did Cook County's failed soda tax cause sales taxes to fizzle, too? - Chicago Daily Herald


Chicago Daily Herald

Did Cook County's failed soda tax cause sales taxes to fizzle, too?
Chicago Daily Herald
The decline in tax revenue from August to September is the equivalent of nearly 2 million fewer 2-liter bottles of soda being sold. Receipts from November -- the fourth and final month the sweetened beverage tax was in effect -- aren't expected until ...

The Government's Taxes on Citizens' Free Time - New Republic


New Republic

The Government's Taxes on Citizens' Free Time
New Republic
When will workers see the fruits of the recently passed Republican tax bill? In just a few weeks, according to the Internal Revenue Service. Last Thursday, the agency released updated tax withholding tables for employers, so that the amount taken out ...
The IRS hired bill collectors to collect back taxes — and got ripped off Los Angeles Times

all 38 news articles »

State of Taxes: Rockland County braces for 2018 tax debate: Tax Watch - The Journal News | LoHud.com


The Journal News | LoHud.com

State of Taxes: Rockland County braces for 2018 tax debate: Tax Watch
The Journal News | LoHud.com
Tax Watch columnist David McKay Wilson looks into the tax debate brewing on many levels in Rockland County in 2018. A decade after borrowing $191 million to pay property tax refunds to a power plant owner, the North Rockland schools still have 20 more ...

Analysis: There's a reason Texas governors keep failing to lower property taxes - Texas Tribune


Texas Tribune

Analysis: There's a reason Texas governors keep failing to lower property taxes
Texas Tribune
It's in the Texas Constitution: The state can't levy a property tax. The governor and the Legislature can't lower rates. The state doesn't do property appraisals, either, so they can't mess with the value of any particular property on the tax rolls ...
Abbott wants to limit local jurisdictions' ability to raise Texans' taxes Dallas News
Gov. Abbott proposes 2.5 percent cap on property tax revenues Chron.com

all 31 news articles »

Financial Sinkhole States In The Trump Tax Era - Forbes


Forbes

Financial Sinkhole States In The Trump Tax Era
Forbes
What damage will the loss of a deduction do to blue states with stiff taxes? Do you live in a sinkhole state? There are eight of them, led by California and New York. These are places where the population dependent on the state — for employment ...

LargeFriends.com - the best dating site for plus-sized singles!
SuccessfulMatchCentral.com - the best dating site for plus-sized singles!

PreLaunchX

PrimeNews Domain Is For Sale - $5,000 For Enquiries eMail Us

© www.PrimeNews.biz - 2012

home | site map | links