Who pays gift tax and when liable?

[JeffreyHawkins]

3 Questions Please:

1) Who is liable for the "Gift Tax" . . . the person giving the money, or the person receiving the money, . . . or both?

2) If a person receives $9999 cash as a gift in a given tax year, do they have to pay any taxes on that gift?

3) In terms of what constitutes "The tax year in which the gift was made" is it when the money is given (date of check), or when the money is deposited in the recipient's account? (Example, I wrote a $9999 check to my sister on 31 DEC 01, but it will not be deposited in her account until 3 JAN 02 . . . is this a gift in year 01 or year 02 for tax purposes?

Thank you!

 

[Cool1]

My family does quite a bit of gifting.

1) The person giving the money is responsible for gift tax.

2) No, gifts are not taxable to the recipient. A gift under $10,000 does not need to be reported by either the giver or getter.

3) Technically you made the gift in 2001, but I believe the law will be flexible. If it were me, and I made no other gifts to my sister in 2001, then I'd use that year.

Note: Even if you gave your sister a $20,000 cash gift, you would need to file a Federal Gift Tax return, but you would NOT pay any tax on the gift. It would however decrease the tax-free amount of your estate by $10,000. If you died in 2002, you could only will $690,000 instead of $700,000 to your heirs tax-free. If you die after 2006, you'll be able to will $990,000.

Also, does your sis have a boyfriend or husband? In the future, if you wanted to gift your sister more than $10,000, you could make a $10,000 check out to her, and another check up tp $10,000 out to her boyfriend (assuming you can trust him), with no forms to fill out.

 

[JeffreyHawkins]

Thanks!

Very Helpful . . . Thank you!

 

[ELNbluemax2]

Federal Estate Tax

I believe for the year 2002, the Federal Estate tax-free amount will be $1,000,000, not $700,000.