Are family vacations considered a reportable gift?

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wiggal
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Are family vacations considered a reportable gift?

Post by wiggal »

Last year, I gifted each of my adult children a $50,000 check and we went on several family vacations together. I paid for those family vacations and the total was about $10,000 per person. Now I understand I will need to file a gift tax return (form 709) for the checks but do I need to report the family vacations???

I am not married and not subject to any state gift taxes.

The instructions for the gift tax return form https://www.irs.gov/pub/irs-pdf/i709.pdf states
Generally, the federal gift tax applies to any transfer by gift of real or personal property, whether tangible or intangible, that you made directly or indirectly, in trust, or by any other means.
From my reading of the wording, I'm not transferring any sort of personal property by paying for family vacations but I'm not sure if I am misinterpreting that statement.

I also imagine you don't report paying for a family dinner out but that sort of reporting minimum isn't listed in the link.

All the example filled out 709 forms I've come across haven't listed family vacations, family dinners out, or anything like that.

Are family vacations considered a reportable gift?
Gill
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Re: Are family vacations considered a reportable gift?

Post by Gill »

I wouldn’t worry about the vacations but you should file a gift tax return for the checks.
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venkman
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Re: Are family vacations considered a reportable gift?

Post by venkman »

I'm not a tax expert, but I would say paying for someone's vacation would count as a gift for tax purposes. By itself, the $10k per person doesn't exceed the yearly limit; but you'd need to add it to the total for the people you also gave a $50k check to.
Thesaints
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Re: Are family vacations considered a reportable gift?

Post by Thesaints »

If you handed them a check, it certainly is a reportable donation.
If you paid for a vacation where they came with you, it is a lot less certain.
Treating members of the family, or otherwise close relatives and even friends, to certain activities especially when they are enjoyed togethr, is considered part of someone's ordinary life and does not generate taxable donations.
AlohaJoe
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Re: Are family vacations considered a reportable gift?

Post by AlohaJoe »

wiggal wrote: Tue Mar 26, 2019 7:46 pm Are family vacations considered a reportable gift?
Yes, they are.

You can find many CPAs/tax lawyers online saying it is. Here's one:
Taking adult children on vacation. Anytime you give an item of value, whether it is a sweater, a new car or a family vacation, you have given a gift.
http://www.troutcpa.com/blog/what-is-a-gift
curmudgeon
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Re: Are family vacations considered a reportable gift?

Post by curmudgeon »

AlohaJoe wrote: Wed Mar 27, 2019 1:47 am
wiggal wrote: Tue Mar 26, 2019 7:46 pm Are family vacations considered a reportable gift?
Yes, they are.

You can find many CPAs/tax lawyers online saying it is. Here's one:
Taking adult children on vacation. Anytime you give an item of value, whether it is a sweater, a new car or a family vacation, you have given a gift.
http://www.troutcpa.com/blog/what-is-a-gift
This is an interesting space in some ways. There can be some grey areas; If I rent a large house for vacation, and then invite friends/relatives to visit, is that a gift? What if I own the vacation house? What if I'm not there and "give" the use of my house (which is not a rental property)? Or what if it was my large yacht? As the values go up, it starts to seem more important. Then you can turn those things around further and say what if I'm giving those things to my favorite New Jersey senator, and claiming the overall costs as business deductionst :twisted:

On another hand, what if I'd like to go on a cruise, but really need more of a helping hand than the crew can provide? If I pay for a relative/companion to share a cabin with me and help manage various activities, is that a gift? Is it pay?

For the OP circumstances, I'd probably report the checks and not worry too much about the travel, but if the numbers got bigger (or became a yearly habit) I might think again. We've been doing some of the same things, but on a smaller scale that is well under the reporting threshold; this thread serves as a reminder to me to keep in the back of my mind for the future if our investment returns are unusually good.
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gilgamesh
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Re: Are family vacations considered a reportable gift?

Post by gilgamesh »

I think just my presence amongst my family and friends is a gift to them...keeping track can get cumbersome, though! :D
Last edited by gilgamesh on Wed Mar 27, 2019 6:36 am, edited 1 time in total.
cdu7
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Re: Are family vacations considered a reportable gift?

Post by cdu7 »

I think officially you are supposed to. Will someone come after you if you didn’t, probably not, but I’d still advise going with the letter of the law.
FederalFIRE
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Re: Are family vacations considered a reportable gift?

Post by FederalFIRE »

I would be very surprised if any more than a handful of people are reporting gifts such as a vacation. Cutting a check or giving a car, house, etc. is much more tangible, but I would venture that it would never cross the mind of most to file a vacation for adult children as a gift.

The burden of proof on that would also be more complicated. For example, my parents have paid for a full family vacation in the past to book everyone together, and then I have paid them back via check for our part of the cost.
TheDoorMan19
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Re: Are family vacations considered a reportable gift?

Post by TheDoorMan19 »

I’m not familiar with the law on this point, but if a vacation is subject to gift tax, what about taking your family out to a nice birthday dinner? Or giving them pizza at your house? I would think There has gotta be some IRS guidance saying that ordinary family activities are not gifts. But I’ve been wrong before...

Edit: I think paying for vacations and dinners is for YOUR benefit, not your family’s. In other words, it isn’t a gift because you are with them and enjoying their company. Contrast that with paying for a vacation that you aren’t attending which seems to me to be more like a gift. Wonder if there is any IRS guidance drawing this distinction.
fourwheelcycle
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Re: Are family vacations considered a reportable gift?

Post by fourwheelcycle »

A common quip among the elder set is "If you pay, they will come". The counter-quip would be "If you do not pay, they may not come".

We do pay for our children and their families to join us on beach rental vacations and to attend cousins' weddings and grandparents' memorial services. They are young and could not afford to come without our help. We benefit from these events, and from our children's presence and participation.
afan
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Re: Are family vacations considered a reportable gift?

Post by afan »

On this issue, I would follow Gill's advice. If anyone knows how to handle this, he does.

On the broader question of what to report once having used up the annual exclusion, I would love to hear his suggestion. In theory one would have to calculate the total value of all other gifts and report it on the return. I don't know whether anyone lists every ham sandwich and parking lot bill.

For most people, absent the $50,000 check, the costs of family entertainment will rarely reach the exclusion amount so there would be nothing to report.
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AlohaJoe
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Re: Are family vacations considered a reportable gift?

Post by AlohaJoe »

TheDoorMan19 wrote: Wed Mar 27, 2019 6:49 am I’m not familiar with the law on this point, but if a vacation is subject to gift tax, what about taking your family out to a nice birthday dinner? Or giving them pizza at your house?
The average parents can give $60,000 a year to their married children without needing to worry about the gift tax.

That covers a lot of pizza and birthday dinners.
SQRT
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Re: Are family vacations considered a reportable gift?

Post by SQRT »

fourwheelcycle wrote: Wed Mar 27, 2019 8:22 am A common quip among the elder set is "If you pay, they will come". The counter-quip would be "If you do not pay, they may not come".
Good one and so true. We pay for relatives and sometimes friends to join us on vacations. Sometimes at one of our vacation homes or sometimes at other exotic places. We can afford to and they generally cannot. Having relatives or close friends with us on these occasions is really enjoyable for us, and hopefully for them. Luckily, being Canadian we don’t have to worry about gift reporting.
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gasdoc
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Re: Are family vacations considered a reportable gift?

Post by gasdoc »

May I ask a side question here? If one is providing full support for a college age child, and one buys them an automobile, is that a "gift" to the IRS, or is it just more "support?"

gasdoc
ohai
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Re: Are family vacations considered a reportable gift?

Post by ohai »

sailaway wrote: Wed Mar 27, 2019 10:32 am
ohai wrote: Wed Mar 27, 2019 10:24 am Dude, if you buy hotel and meals for your family a lot, that's a gift - technically. However, no one reports this sort of thing and IRS will never be able to quantify it, unless you are a special person like a mafia boss and they pursue tax reporting as part of a broader effort to nail you. Anyway, if the Kardashians don't report it, do you feel like you should? That's up to you I guess.
Who uses the Kardashians as their moral guidepost?!
Given that Kim has 70 million social media followers, the probable answer is, for better or worse, a lot of people.
sailaway
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Re: Are family vacations considered a reportable gift?

Post by sailaway »

gasdoc wrote: Wed Mar 27, 2019 11:23 am May I ask a side question here? If one is providing full support for a college age child, and one buys them an automobile, is that a "gift" to the IRS, or is it just more "support?"

gasdoc
I think the IRS would look at whose name it was registered under.
mpnret
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Re: Are family vacations considered a reportable gift?

Post by mpnret »

This really gets to be a gray area. What if a father pays for a daughter's wedding?
sailaway
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Re: Are family vacations considered a reportable gift?

Post by sailaway »

mpnret wrote: Wed Mar 27, 2019 11:42 am This really gets to be a gray area. What if a father pays for a daughter's wedding?
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
mpnret
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Re: Are family vacations considered a reportable gift?

Post by mpnret »

sailaway wrote: Wed Mar 27, 2019 11:45 am
mpnret wrote: Wed Mar 27, 2019 11:42 am This really gets to be a gray area. What if a father pays for a daughter's wedding?
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
Well, I thought I was fulfilling a perceived cultural obligation but did not pay the vendors directly.
fru-gal
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Re: Are family vacations considered a reportable gift?

Post by fru-gal »

sailaway wrote: Wed Mar 27, 2019 11:45 am
mpnret wrote: Wed Mar 27, 2019 11:42 am This really gets to be a gray area. What if a father pays for a daughter's wedding?
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
Geez, that would never have crossed my mind. Do parents report paying college tuition as a gift?
TropikThunder
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Re: Are family vacations considered a reportable gift?

Post by TropikThunder »

sailaway wrote: Wed Mar 27, 2019 11:45 am
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
According to the IRS, the only type of gifts for which paying the vendor directly allows the gift to be excluded are medical and educational expenses.
ModifiedDuration
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Re: Are family vacations considered a reportable gift?

Post by ModifiedDuration »

fru-gal wrote: Wed Mar 27, 2019 12:30 pm
sailaway wrote: Wed Mar 27, 2019 11:45 am
mpnret wrote: Wed Mar 27, 2019 11:42 am This really gets to be a gray area. What if a father pays for a daughter's wedding?
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
Geez, that would never have crossed my mind. Do parents report paying college tuition as a gift?
Payment of tuition diectly to a school on behalf of any student is exempt from gift tax implications. So, if you want to pay tuition to Harvard for your neignbor’s child, as long as you pay Harvard directly, there are no gift tax implications.

https://www.fastweb.com/financial-aid/a ... gift-taxes
TropikThunder
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Re: Are family vacations considered a reportable gift?

Post by TropikThunder »

fru-gal wrote: Wed Mar 27, 2019 12:30 pm
sailaway wrote: Wed Mar 27, 2019 11:45 am
mpnret wrote: Wed Mar 27, 2019 11:42 am This really gets to be a gray area. What if a father pays for a daughter's wedding?
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
Geez, that would never have crossed my mind. Do parents report paying college tuition as a gift?
If the child is a minor, tuition is considered part of the parental obligation. If the child is an adult, tuition is considered a gift if the money is given to the child who in turn pays the school. It is exempt if the giver pays the school directly. Now, do people report this? No idea, but how many families in the US will this even apply to?
miamivice
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Re: Are family vacations considered a reportable gift?

Post by miamivice »

Yes, if a family vacation goes above the threshold (or a wedding), it's a gift and reportable.

With that said, no taxes are due and no taxes will ever be due under current law. Your estate has to be $11 million or more (married couple) for the gift tax to come into play which will not impact the majority of us.
ModifiedDuration
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Re: Are family vacations considered a reportable gift?

Post by ModifiedDuration »

miamivice wrote: Wed Mar 27, 2019 1:15 pm Yes, if a family vacation goes above the threshold (or a wedding), it's a gift and reportable.

With that said, no taxes are due and no taxes will ever be due under current law. Your estate has to be $11 million or more (married couple) for the gift tax to come into play which will not impact the majority of us.
The current estate and gift tax limit is $11.4 million for an individual ($22.8 million for a couple).
JGoneRiding
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Re: Are family vacations considered a reportable gift?

Post by JGoneRiding »

FederalFIRE wrote: Wed Mar 27, 2019 6:42 am I would be very surprised if any more than a handful of people are reporting gifts such as a vacation. Cutting a check or giving a car, house, etc. is much more tangible, but I would venture that it would never cross the mind of most to file a vacation for adult children as a gift.

The burden of proof on that would also be more complicated. For example, my parents have paid for a full family vacation in the past to book everyone together, and then I have paid them back via check for our part of the cost.
Most of the time a vacation isn't going to exceed 15k per person! In this case OP has gone over the limit. Yes he should report it.

Ex. Man keeps mistress in style. These are gifts and require reporting, this is little different.

If it was ONLY the vacation would be unlikely to matter.
JGoneRiding
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Re: Are family vacations considered a reportable gift?

Post by JGoneRiding »

fru-gal wrote: Wed Mar 27, 2019 12:30 pm
sailaway wrote: Wed Mar 27, 2019 11:45 am
mpnret wrote: Wed Mar 27, 2019 11:42 am This really gets to be a gray area. What if a father pays for a daughter's wedding?
According to the internet, it depends on whether they pay the vendors directly (fulfilling a perceived cultural obligation) or handed over the money.

Which takes us back to the car: in some neighborhoods there is a perceived cultural obligation to get your kid a car...
Geez, that would never have crossed my mind. Do parents report paying college tuition as a gift?
That is NOT a gray area :) as long as you pay medical Bill's and tuition directly the IRS has clearly stated it is not a gift. If however you transfer money to your child to pay these things it is a gift.
Pigeye Brewster
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Re: Are family vacations considered a reportable gift?

Post by Pigeye Brewster »

From the IRS website's FAQ on gifts:

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
1.Gifts that are not more than the annual exclusion for the calendar year.
2.Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3.Gifts to your spouse.
4.Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.


https://www.irs.gov/businesses/small-bu ... ft-taxes#2
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Re: Are family vacations considered a reportable gift?

Post by LadyGeek »

Discussions of dishonest behavior or bypassing the law is totally unacceptable.

I removed an off-topic post and reply suggesting to not report gifts to the IRS (tax evasion).
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MarkerFM
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Re: Are family vacations considered a reportable gift?

Post by MarkerFM »

TheDoorMan19 wrote: Wed Mar 27, 2019 6:49 am Edit: I think paying for vacations and dinners is for YOUR benefit, not your family’s. In other words, it isn’t a gift because you are with them and enjoying their company. Contrast that with paying for a vacation that you aren’t attending which seems to me to be more like a gift. Wonder if there is any IRS guidance drawing this distinction.
I like your way of thinking. Just don't take it too far and in addition to their company ask them to make you a drink or play tennis with you or you might have to send them a 1099. :D
HornedToad
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Re: Are family vacations considered a reportable gift?

Post by HornedToad »

There's no way that paying for a wedding if you directly pay the vendors is a gift. That's the same thing as the parents hosting an expensive party.

If you then give the money to your child and they pay the vendors then I could see it as a gift.

Similarly, if you go on a family vacation and pay for hotel rooms, AirBnB and dinners then it wouldn't be a gift. If you give your child an African Safari excursion that they go on then it's a gift.

The example above about vacations read more as giving a vacation as a gift and not going on a joint vacation together.
JackoC
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Re: Are family vacations considered a reportable gift?

Post by JackoC »

Thesaints wrote: Wed Mar 27, 2019 1:11 am If you handed them a check, it certainly is a reportable donation.
If you paid for a vacation where they came with you, it is a lot less certain.
Treating members of the family, or otherwise close relatives and even friends, to certain activities especially when they are enjoyed togethr, is considered part of someone's ordinary life and does not generate taxable donations.
That is what my tax/estate guy told me. Not just general 'ordinary life', but specifically that you can consider inviting people along for a vacation, or dinner, to be for your own purposes, their company. If you *send* somebody on a vacation (like pay for a kid's honeymoon), that's definitely a gift.

Here's a blog post quoting an estate attorney giving a similar analysis for paying for a wedding, directly to wedding service providers:
"If the parents contracted with wedding vendors and paid them directly, the parents could reasonably argue the money was not a gift because they were fulfilling a “perceived cultural obligation,” says Steve Harnett, associate director of education with the American Academy of Estate Planning Attorneys. Or they could argue the party was as much for them as for their children."

Although it also gives this rationale which might not sit as well with sticklers:

"In practice, the tax professionals I spoke to have never seen weddings reported on gift-tax returns, nor have they seen any rulings or court decisions on the subject."
https://blog.sfgate.com/pender/2013/05/ ... -gift-tax/

That is to say, high horses sometimes get saddled up when anyone starts with 'in practice' about tax rules :happy . But the plain reality is tax rules aren't always 100% clear, there's no moral obligation to lean in the direction of paying more when they aren't clear, and you can't say it's 'dishonest' or 'evasion' not to report something until you've clearly demonstrated it's legally required to report it. The only moral obligation in tax paying is to follow the law. When it's not wholly clear what the law requires, then moral scolding should go out the window, IMO. You can *practically* say it's desirable to avoid possible hassles with the IRS even on things where you might be right, but then it's back to practicality, part of which is the likelihood the thing in question would ever be challenged.
aspiringboglehead
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Re: Are family vacations considered a reportable gift?

Post by aspiringboglehead »

JackoC wrote: Wed Mar 27, 2019 10:53 pm That is what my tax/estate guy told me. Not just general 'ordinary life', but specifically that you can consider inviting people along for a vacation, or dinner, to be for your own purposes, their company. If you *send* somebody on a vacation (like pay for a kid's honeymoon), that's definitely a gift.
Obviously without giving legal advice about any particular situations -- and, I should add, without having an updated sense of any specific potential caselaw -- my judgment agrees.

Under US law (compared, for example, to French law), my understanding is that there is no exemption to the gift tax for gifts given as a matter of "ordinary life." But I understand there to be a legitimate argument that, for example, a wedding is not the bride and groom's party; it is instead arguably a party thrown by the payor(s), whoever they are, to celebrate the marriage. (One could legitimately ask why food and other things provided at a party aren't taxable gifts to the party's attendees; here, we do probably have some theoretical residue of the older legal notion that "ordinary stuff" doesn't count, and as to individual attendees they're almost always within the annual exclusion anyway. Certainly if you gave out party tokens worth $50,000 to attendees, the transfer would implicate the gift tax.)

The same type of argument could be made for the right sort of family vacation, although I would question that if it's just "Would you like to fly with us to Europe and do what you want there?" (versus, for example, a "family retreat" largely planned by a particular member of the family, or a grandparent paying to fly adult grandkids to Boca so they can see them more often). In practice, of course, a lot of this goes unpoliced because it's relatively small, and the IRS could lose revenue only for the very few estates larger than the lifetime exemption anyway; that's of course not an endorsement of violating the tax laws.
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