33%(3)1 out of 3 people found this document helpful
This preview shows page 1 - 11 out of 30 pages.
Week 11Transfer Taxes and Wealth Planning
The Gift TaxThe Gift Tax
What Makes A Gift?Property transferred to a recipient who pays no or inadequate considerationThe transfer should be “complete”All gifts are valued at the FMV as of the date the transfer becomes completeLinked with the Estate Tax in a Unified System
When Transfer is Complete?Gift does not occur until transfer is completeTransfer complete when donor has given up “dominion & control”Leaves donor no power to change gift’s disposition, whether for own benefit or for benefit of anotherOccurs when donor relinquishes control of the property and donee accepts the gift
Valuation of GiftsGift valued at FMV upon transferGift may be for a partial interest or only certain rightslife estates, remainder interestsFMV of partial interests determined by using actuarial tables and present value computations
Some Special G/T SituationsCreation of joint bank accounts,Creation of other joint tenancies,Forgiveness of debt,Transfer of life insurance policies,A general power of appointment.Transfers in the “ordinary course of business”
Below-Market LoansGeneral rulesForegone interest is taxable income to the lender and a taxable gift to the borrowerDe minimus rulesRules do not apply to loans ≤ $10,000
What is Exempted?Direct PMTs of medical expenses,Direct PMTs of tuition (room & board is a gift),Property settlement in divorceTransfer to political organizationsIncomplete transfers
Exclusions & DeductionsExclude transfers up to $14,000 per donee each year (2013 and 2014)Indexed for inflationHusband and wife may each give $14,000 per donee without tax consequence (if splitting election is made)Gift must constitute present interestFuture interest gifts not eligible for exclusion
Special rule for trusts for minorsAnnual exclusion available for gifts to §2053(c) trusts for minors ifUntil beneficiary is 21, trustee may pay income and/or underlying
You've reached the end of your free preview.
Want to read all 30 pages?
Taxes, Taxation in the United States, Gross Estate, taxable gifts