Gift Tax

What is the name of your state? MI

My Father has decided to gift out some of his money. When you gift money to someone do they have to be a blood relative or an In-Law? Or can you gift money to anyone you choose like extended family and friends?

Also is there tax on either end of the gift or is it totally tax free for both giver and receiver? I do understand it needs to be reported to IRS on both sides and that its $12,000 individual or $24,000 married couples tax free.

Your father can give money to total strangers if he pleases. The receiver of the gift is not ever taxed, regardless of the amount. The giver can give up to $12,000 per person per year without triggering a gift tax filing requirement. Therefore he could give $24,000 to a married couple - twice that if the giver is married and his spouse consents.

If the giver exceeds the $12,000 threshold, he/she will need to file a gift tax return, however no tax will be due until the lifetime $1,000,000 gift tax exemption is exceeded. That is over and above the $12,000 limit.

One last question. I understand the federal tax situation. What about State Gift Taxes. Does the State of Michigan have different rules for Gift Tax? Or do they just adopt the Federal tax law in the case of gift taxes?

IRSOS answer is partially incorrect.

Firstly: The recipient of a gift MAY elect to pay any gift tax owed, however gift tax cannot be forced onto the gift recipient.

Also

irsos said:

If the giver exceeds the $12,000 threshold, he/she will need to file a gift tax return, however no tax will be due until the lifetime $1,000,000 gift tax exemption is exceeded. That is over and above the $12,000 limit.

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I urge you to consult the IRS for a full treatment. See Publication 950 for the basics.

http://www.irs.gov/pub/irs-pdf/p950.pdf

Your Father should consult with an estate planner and accountant

Don't be penny wise pound foolish by going this do-it-yourself route.

irsos said:

The recipient is NEVER taxed. Their decision to pay the tax does not change the fact that NO gift tax is EVER imposed on the recipient.

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Your statement is erroneous in omission and interpretation - the vital information to answer the posters actual question, which concerned who would be responsible for paying the gift tax (IF ANY)

The recipient of a gift may elect to pay the tax (and relieve his father of the tax burden) - which is very different then your absolute response that the recipient is never taxed.

If your statement "The recipient is NEVER taxed" was true as an absolute then the recipients payment of any gift taxes would in fact be a gift... and thus potentially subject to taxes and filing requirements. Get the drift.

This is why the original poster should at the least read Pub 950 and better still consult an accountant / slash estate planner.