gift tax question

[mdegroot]

My sister-in-law (Mississippi) wants to give my stepdaughter(Illinois) a car for christmas. The value of the car is 15,000. I am not sure I want the car titled in my stepdaughters name because insurance will be higher. So, she was going to give the car to my wife and I. However, there is a question of gift tax. How much will be subject of gift tax, if any, in either situation?

 

[loku]

If she gives the car to your stepdaughter, there is a $10,000 annual gift exclusion for gifts to each person; therefore, $5,000 would be subject to gift tax. A gift tax return would be due for the year, but there would be no tax because each person has a lifetime exclusion of $675,000 from the gift and estate tax. The $5,000 gift would be excluded under the lifetime exclusion, leaving an exclusion of $670,000 to apply against future gifts and the estate tax. The lifetime exclusion is scheduled to increase each year.

If she gives the car to you and your wife, the entire gift would be excluded under the two $10,000 annual gift tax exclusions that would apply because the gift is given to two people. No gift tax return would be due and no lifetime exclusion would be needed.

 

[mdegroot]

Thank you for your reply!

I do have a silly question. Does my sister in law need to report it at all on taxes in either case (or do we)?

 

[mdegroot]

Okay, I actually read your post this time. No need to answer, I understand that my sister in law would report a gift if giving to my step daughter but no tax liablility should be incurred.

Thanks again for your reply!