Who In Their Right Mind Files Gift Tax Returns? And Why?

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JoeNJ28
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by JoeNJ28 »

I think it’s important that everyone follows the law as we are a society built on laws and that’s what keeps us functioning. So file the return and be thankful that you have enough wealth to even be able to gift.
fsrph
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by fsrph »

Stinky wrote: Sat Feb 10, 2024 2:13 pm
TomatoTomahto wrote: Sat Feb 10, 2024 1:34 pmWe are in Massachusetts, with a comically low lifetime exclusion (recently raised from $1M to $2M), so it’s important for us to stay legal.
Reason #82 to not live in Massachusetts.

At least in my book. :D
Or Pennsylvania. There is no exclusion for inheritance tax. It starts on dollar one.

Francis
"Success is getting what you want. Happiness is wanting what you get." | Dale Carnegie
toddthebod
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by toddthebod »

Halicar wrote: Sat Feb 10, 2024 2:51 pm
toddthebod wrote: Sat Feb 10, 2024 2:16 pm
Halicar wrote: Sat Feb 10, 2024 2:01 pm
toddthebod wrote: Sat Feb 10, 2024 1:47 pm
Halicar wrote: Sat Feb 10, 2024 1:42 pm Last summer one of my neighbors had a cookout and invited everyone in the neighborhood. I went and did not pay anything. Should I ask them for a receipt?
Did your neighbor also give you $17,000 in cash?
No, but it seems that the law does not apply solely to cash gifts above $17,000. I was being a bit of a smart alec, but it is troubling when the law is essentially impossible to follow.
If they didn't give you $17,000 in other gifts, the free barbecue is under the annual exclusion and is therefore not reportable.
I appreciate your replies. My example was probably a red herring, but I think it's standard advice that wealthy individuals can write checks to their children for $17,000 every year with no reporting requirements. But if they do that don't they then have to keep track of every Super Bowl party and Christmas stocking? And then we're back at "well, yes, the law says you have to do this but nobody actually does it."
It seems to me like the problem is the annual exclusion is being abused. I imagine the original intent of the annual exclusion was to account for all those birthday gifts and dinners and such, not for wealthy people to deposit large checks into trust funds for their toddler as long as their toddler has the right to withdraw it for the first 30 days.
Backtests without cash flows are meaningless. Returns without dividends are lies.
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Watty
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Watty »

02nz wrote: Fri Feb 09, 2024 10:45 pm
exodusNH wrote: Fri Feb 09, 2024 4:34 pm It always makes sense to comply with tax law.
+1. Seems a little strange to have to say this to OP, who appears to be a lawyer, but OK ...
That was my thought too.

Making bad financial choices which are out of character can be a sign of issues which the OP might want to discuss with their doctor.
WhyNotUs
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by WhyNotUs »

I am pro gift tax return. Keep them in a file for the future.

One often hears about spats about who got what after one dies and there is an estate to settle. The gift tax form is a convenient way to track those gifts and to document that it is the intent of the gifter that it is clearly a gift, not a loan.

People get weird, not all but enough to make the few minutes required to file the form worthwhile IMO.
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single2019
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by single2019 »

TomatoTomahto wrote: Sat Feb 10, 2024 2:20 pm
Stinky wrote: Sat Feb 10, 2024 2:13 pm
TomatoTomahto wrote: Sat Feb 10, 2024 1:34 pmWe are in Massachusetts, with a comically low lifetime exclusion (recently raised from $1M to $2M), so it’s important for us to stay legal.
Reason #82 to not live in Massachusetts.

At least in my book. :D
Well, we were in NJ, so it’s an upgrade for us :D

We are grateful to be here and have not found another place we’d rather be; if we find one, we will go there. The best part of estate taxes is that I won’t care any longer when they come due.
New Jersey does not have an estate tax. There is an inheritance tax but it’s not applicable to class A beneficiaries
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JazzTime
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by JazzTime »

Stinky wrote: Sat Feb 10, 2024 2:13 pm
TomatoTomahto wrote: Sat Feb 10, 2024 1:34 pmWe are in Massachusetts, with a comically low lifetime exclusion (recently raised from $1M to $2M), so it’s important for us to stay legal.
Reason #82 to not live in Massachusetts.

At least in my book. :D
You're way off. It's reason #1 in my book. My estate plan would be very simple if it weren't for the MA confiscatory estate tax. As much as I like where I live (now 44 years), it is a strong motivation to move to NH (plus the added benefit of no income tax).

Maybe Tomato can correct me if I'm wrong, but he said the MA exclusion is a lifetime exclusion. It is my understanding that you can give away your estate during your lifetime and avoid the MA estate tax. In other words, MA does not track lifetime gifts.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
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Lee_WSP
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Lee_WSP »

JazzTime wrote: Sat Feb 10, 2024 6:29 pm
Stinky wrote: Sat Feb 10, 2024 2:13 pm
TomatoTomahto wrote: Sat Feb 10, 2024 1:34 pmWe are in Massachusetts, with a comically low lifetime exclusion (recently raised from $1M to $2M), so it’s important for us to stay legal.
Reason #82 to not live in Massachusetts.

At least in my book. :D
You're way off. It's reason #1 in my book. My estate plan would be very simple if it weren't for the MA confiscatory estate tax. As much as I like where I live (now 44 years), it is a strong motivation to move to NH (plus the added benefit of no income tax).

Maybe Tomato can correct me if I'm wrong, but he said the MA exclusion is a lifetime exclusion. It is my understanding that you can give away your estate during your lifetime and avoid the MA estate tax. In other words, MA does not track lifetime gifts.
Its a one or two year look back. Its only awful because no other state has one that low.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by doobiedoo »

LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at least some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
Last edited by doobiedoo on Sun Feb 11, 2024 12:29 am, edited 1 time in total.
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Lee_WSP
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Lee_WSP »

doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
I don't need case law. See the definition. Transfer for less than valuable consideration. Its quite clear. Just because you don't like it doesn't mean it isn't clear.
toddthebod
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by toddthebod »

doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
If you are truly interested in the subject, there was a ton written about vacations and gift taxes in the context of Harlan Crow and Clarence Thomas. The consensus seems to be, yes, these vacations should be reportable/taxable gifts, but nobody reports them, and the IRS never does anything about it.
https://www.google.com/search?q=crow+th ... n+gift+tax
Backtests without cash flows are meaningless. Returns without dividends are lies.
FireSekr
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by FireSekr »

Lee_WSP wrote: Sat Feb 10, 2024 7:12 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
I don't need case law. See the definition. Transfer for less than valuable consideration. Its quite clear. Just because you don't like it doesn't mean it isn't clear.
So who is it a gift to? If a father spends $200k on a wedding, the gift wouldn’t be to the child because the child isn’t consuming $200k of property. If the wedding was $1,000 per guest and there were 200 guests, wouldn’t the gift be $1,000 to 200 separate people since each guest is theoretically getting $1k in value? It’s not a $200k gift to the couple getting married, it’s a gift to each of the guests
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Lee_WSP
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Lee_WSP »

FireSekr wrote: Sat Feb 10, 2024 7:34 pm
Lee_WSP wrote: Sat Feb 10, 2024 7:12 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
I don't need case law. See the definition. Transfer for less than valuable consideration. Its quite clear. Just because you don't like it doesn't mean it isn't clear.
So who is it a gift to? If a father spends $200k on a wedding, the gift wouldn’t be to the child because the child isn’t consuming $200k of property. If the wedding was $1,000 per guest and there were 200 guests, wouldn’t the gift be $1,000 to 200 separate people since each guest is theoretically getting $1k in value? It’s not a $200k gift to the couple getting married, it’s a gift to each of the guests
The child because the child would otherwise be paying for it. That's easy.

Your hypo to catch me would be "is the child then regifting it to all the guests?" To which the answer is maybe. It technically is, but there's no case law on that one.
billaster
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by billaster »

Lee_WSP wrote: Sat Feb 10, 2024 8:03 pm
FireSekr wrote: Sat Feb 10, 2024 7:34 pm
Lee_WSP wrote: Sat Feb 10, 2024 7:12 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
I don't need case law. See the definition. Transfer for less than valuable consideration. Its quite clear. Just because you don't like it doesn't mean it isn't clear.
So who is it a gift to? If a father spends $200k on a wedding, the gift wouldn’t be to the child because the child isn’t consuming $200k of property. If the wedding was $1,000 per guest and there were 200 guests, wouldn’t the gift be $1,000 to 200 separate people since each guest is theoretically getting $1k in value? It’s not a $200k gift to the couple getting married, it’s a gift to each of the guests
The child because the child would otherwise be paying for it. That's easy.

Your hypo to catch me would be "is the child then regifting it to all the guests?" To which the answer is maybe. It technically is, but there's no case law on that one.
I think one could argue it is a party for the benefit of the parents. I've seen the Godfather movies.
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Lee_WSP
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Lee_WSP »

billaster wrote: Sat Feb 10, 2024 8:14 pm
Lee_WSP wrote: Sat Feb 10, 2024 8:03 pm
FireSekr wrote: Sat Feb 10, 2024 7:34 pm
Lee_WSP wrote: Sat Feb 10, 2024 7:12 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm




@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
I don't need case law. See the definition. Transfer for less than valuable consideration. Its quite clear. Just because you don't like it doesn't mean it isn't clear.
So who is it a gift to? If a father spends $200k on a wedding, the gift wouldn’t be to the child because the child isn’t consuming $200k of property. If the wedding was $1,000 per guest and there were 200 guests, wouldn’t the gift be $1,000 to 200 separate people since each guest is theoretically getting $1k in value? It’s not a $200k gift to the couple getting married, it’s a gift to each of the guests
The child because the child would otherwise be paying for it. That's easy.

Your hypo to catch me would be "is the child then regifting it to all the guests?" To which the answer is maybe. It technically is, but there's no case law on that one.
I think one could argue it is a party for the benefit of the parents. I've seen the Godfather movies.
Back then it was customary for the brides groom to pay it. Either way, no one reports it and the service turns a blind eye. It'd cause too much of an uproar.
cubs1999
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by cubs1999 »

toddthebod wrote: Sat Feb 10, 2024 7:31 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
If you are truly interested in the subject, there was a ton written about vacations and gift taxes in the context of Harlan Crow and Clarence Thomas. The consensus seems to be, yes, these vacations should be reportable/taxable gifts, but nobody reports them, and the IRS never does anything about it.
https://www.google.com/search?q=crow+th ... n+gift+tax
Thank you for the link. I just read the Pro publica article and this segment summarized the thinking that you summarized:
https://www.propublica.org/article/harl ... superyacht

Beth Kaufman, a partner with Lowenstein Sandler who specializes in estate planning and a veteran of the Treasury Department’s Office of Tax Policy, said she’d counseled clients on the issue. After one couple took their extended family on an exotic vacation, she said, she helped them calculate the reportable costs and file a gift tax return.

However, taxpayers rarely report these sorts of trips, experts said. One important factor is that the IRS has no way of knowing about gifts like these unless they happen to be uncovered in an audit. The agency has also signaled no interest in scrutinizing these kinds of interactions. In fact, experts weren’t aware of any audits related to gifts of this kind.


There was a paper that was linked in the article that someone who really wants to go down this rabbit hole can download (I just read the abstract):
https://papers.ssrn.com/sol3/papers.cfm ... id=4449488
doobiedoo
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by doobiedoo »

toddthebod wrote: Sat Feb 10, 2024 7:31 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.

The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at least some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
If you are truly interested in the subject, there was a ton written about vacations and gift taxes in the context of Harlan Crow and Clarence Thomas. The consensus seems to be, yes, these vacations should be reportable/taxable gifts, but nobody reports them, and the IRS never does anything about it.
https://www.google.com/search?q=crow+th ... n+gift+tax
toddthebod, thank your for the link.
The opinion at thehill.com was enlightening to me [as someone who does not know very much about law].

".. The gift tax is imposed on the transfer of property, and whether a gift has been made involves a simple comparison of what Crow transferred (thousands of dollars worth of travel to Clarence and Ginni Thomas) with what Crow got in return (nothing, it would seem, other than the pleasure of his guests’ company, one hopes).

..the Supreme Court decided in a 1984 case called Dickman v. United States that “property” is an expansive concept. In that case, the court held that when a husband and wife made interest-free demand loans to their son, they were making “transfers of property” for federal gift tax purposes. It turns out that the right to use property, whether that property is money or even a jet, is subject to the gift tax.

The reason that Crow’s gift tax obligations are not 100 percent clear, though, is what the Supreme Court had to say in the Dickman case about what the tax law did not reach. The court said that the IRS did not appear to be extending the gift tax to the “traditional family matters,” like when parents lend their adult children use of a car or a vacation home. When or if the moment arrived, the court said, that the government attempted to tax “such commonplace transactions as a loan of the proverbial cup of sugar to a neighbor or a loan of lunch money to a colleague,” there would be time to consider the issue.
"
https://thehill.com/opinion/judiciary/3 ... ury-trips/

While I do not think the “traditional family matters” proviso applies to Clarence Thomas and Harlan Crowe, it might apply to wedding receptions. And it specifically called out vacation homes used by adult children.

The bottom line seems to be "Nobody want to make a federal case out of it".
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nedsaid
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by nedsaid »

One thing to keep in mind is that all Federal and State Estate Tax Returns are essentially audited. If one is gifting over the IRS limits, then it is a good idea to file the Gift Tax Returns. The folks who look at Estate Tax Returns are pretty motivated to look things over carefully, sloppy gifting without filing the returns can come back to haunt your heirs later on. Most people don't gift in high enough amounts that exceed the IRS limits and few will leave estates high enough to be subject to Federal Estate Tax. However, state limits can be a lot lower than the Federal limits. My state has a limit of only $1,000,000.

I would agree that in practice, the IRS will likely not look at such things as weddings and vacations for gifting but I would still seek a professional opinion if this gets to be much over the gifting limits. Someone with experience in Estates will be familiar with the practices of the IRS and State taxing authorities.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by TomatoTomahto »

JazzTime wrote: Sat Feb 10, 2024 6:29 pm
Stinky wrote: Sat Feb 10, 2024 2:13 pm
TomatoTomahto wrote: Sat Feb 10, 2024 1:34 pmWe are in Massachusetts, with a comically low lifetime exclusion (recently raised from $1M to $2M), so it’s important for us to stay legal.
Reason #82 to not live in Massachusetts.

At least in my book. :D
You're way off. It's reason #1 in my book. My estate plan would be very simple if it weren't for the MA confiscatory estate tax. As much as I like where I live (now 44 years), it is a strong motivation to move to NH (plus the added benefit of no income tax).

Maybe Tomato can correct me if I'm wrong, but he said the MA exclusion is a lifetime exclusion. It is my understanding that you can give away your estate during your lifetime and avoid the MA estate tax. In other words, MA does not track lifetime gifts.
It was my mistake to call it a “lifetime exclusion.” Apologies. A brain fart.

As for NH, our estate attorney loves the iidea. I have to admit that I’ve looked at some Zillow listings, but I’ve got our MA house just as I like it.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by snackdog »

Small Law Survivor wrote: Fri Feb 09, 2024 3:58 pm ...

What if she gets married and we pay for the wedding? Do we have to file a gift return?
....
It depends. Some scenarios:
- You give your daughter a check for $50,000 and tell her you hope she uses it to defray wedding expenses or a vacation. Reportable.
- You give your daughter a check for $12.5k, your SIL $12.5k and your wife does same, for a total of $50k. Non reportable.
- You tell your daughter to plan a wedding or vacation and have the invoices (in her name) sent to you. You pay them and it totals $50K. Reportable.
- You tell your daughter you are planning a wedding or vacation and she is invited and you would welcome input on the arrangements. You plan the event and pay the invoices (which have your name on them) totaling $100k. Non reportable.
- You are on the Board of your local golf club. The club manager happens to offer your daughter use of the club for the wedding and reception, gratis, instead of the normal $50,000 fee. Possibly reportable?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Stinky »

TomatoTomahto wrote: Sun Feb 11, 2024 3:59 am
As for NH, our estate attorney loves the idea. I have to admit that I’ve looked at some Zillow listings, but I’ve got our MA house just as I like it.
Is your Massachusetts future estate tax burden so large that your (new) home in New Hampshire would be basically free? That is, paid for by your savings on state estate taxes for a resident of NH vs MA.

Food for thought.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by JazzTime »

nedsaid wrote: Sun Feb 11, 2024 1:18 am One thing to keep in mind is that all Federal and State Estate Tax Returns are essentially audited. If one is gifting over the IRS limits, then it is a good idea to file the Gift Tax Returns. The folks who look at Estate Tax Returns are pretty motivated to look things over carefully, sloppy gifting without filing the returns can come back to haunt your heirs later on. Most people don't gift in high enough amounts that exceed the IRS limits and few will leave estates high enough to be subject to Federal Estate Tax. However, state limits can be a lot lower than the Federal limits. My state has a limit of only $1,000,000.
Any stats on this? I would be interested if those familiar with the matter would opine.

My guess would be that the IRS is not likely to audit an estate return unless something doesn't look quite right, and also depending on the size of the estate. For example, a $100M estate might get more scrutiny than a $15M estate. I may be wrong about that. Let me propose an example for consideration.

In 2010 Albert has $800K in assets. But he's a generous guy and decides to give his brother, Boris, $100K so he can buy a house. Albert is unaware at the time of gift tax rules and does not file a gift tax return.

Five years later, Albert reads Bogleheads and learns about gift tax reporting. However, he decides that his estate will never be very large and doesn't wish to waste his time and energy to file a pointless gift tax return. He figures, "no harm, no foul."

In 2020, Albert wins $25M in the lottery. He proceeds to spend lavishly and dies in 2030 with an estate of $20M. In 2030, the estate tax exclusion is %18M so his estate is $2M over the exclusion. His attorney files all the required estate tax filings and pays the correct amount of tax. His attorney is not aware of the $100K gift in 2010 and there are no family members aware of it either.

What is the likelihood that the IRS decides to do a deep financial colonoscopy and uncover the unreported gift made 20 years prior to death?

I am not trying to justify Albert's behavior or suggest anyone not properly report gifts. I am simply trying to determine how deeply the IRS typically investigates situations like this where the estate return appears to comply on its face.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by WolfgangPauli »

FWIW, I filed a gift tax return in a year I paid off my son's student loans and gave him and his wife enough money for a 20% down payment on his home. Why did I do that? 1) It is required and 2) I never want to come close to being illegal.

If you pay wedding vendors directly (example) because YOU are putting on the wedding then I do not see that as a gift. But, let's say you are buying your son a $60K car. Just because you paid the dealer directly does not change the fact that it is a gift and it is part of the gift tax return.

One that that was crazy when I filed it was that it had to be done on paper. No electronic filing of gift taxes (2019) which I thought was odd.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Dmevsjd »

The estate and gift tax exemption is halved in a couple years. I imagine many here will be affected. As was stated above, all 706s get highly scrutinized. Why on earth would you mess with the IRS and not file a simple gift tax return utilizing some of your exemption for large lifetime gifts which are incredibly easy to track by the IRS?

There are multiple threads here with people agonizing over the wash sale rules and all kinds of other potential gotchas for the IRS to pursue yet this one, an issue that can cause your family all kinds of grief after you’re gone, seems to have a give the finger to the government vibe.

Baffling.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by nedsaid »

JazzTime wrote: Sun Feb 11, 2024 8:33 am
nedsaid wrote: Sun Feb 11, 2024 1:18 am One thing to keep in mind is that all Federal and State Estate Tax Returns are essentially audited. If one is gifting over the IRS limits, then it is a good idea to file the Gift Tax Returns. The folks who look at Estate Tax Returns are pretty motivated to look things over carefully, sloppy gifting without filing the returns can come back to haunt your heirs later on. Most people don't gift in high enough amounts that exceed the IRS limits and few will leave estates high enough to be subject to Federal Estate Tax. However, state limits can be a lot lower than the Federal limits. My state has a limit of only $1,000,000.
Any stats on this? I would be interested if those familiar with the matter would opine.

My guess would be that the IRS is not likely to audit an estate return unless something doesn't look quite right, and also depending on the size of the estate. For example, a $100M estate might get more scrutiny than a $15M estate. I may be wrong about that. Let me propose an example for consideration.

In 2010 Albert has $800K in assets. But he's a generous guy and decides to give his brother, Boris, $100K so he can buy a house. Albert is unaware at the time of gift tax rules and does not file a gift tax return.

Five years later, Albert reads Bogleheads and learns about gift tax reporting. However, he decides that his estate will never be very large and doesn't wish to waste his time and energy to file a pointless gift tax return. He figures, "no harm, no foul."

In 2020, Albert wins $25M in the lottery. He proceeds to spend lavishly and dies in 2030 with an estate of $20M. In 2030, the estate tax exclusion is %18M so his estate is $2M over the exclusion. His attorney files all the required estate tax filings and pays the correct amount of tax. His attorney is not aware of the $100K gift in 2010 and there are no family members aware of it either.

What is the likelihood that the IRS decides to do a deep financial colonoscopy and uncover the unreported gift made 20 years prior to death?

I am not trying to justify Albert's behavior or suggest anyone not properly report gifts. I am simply trying to determine how deeply the IRS typically investigates situations like this where the estate return appears to comply on its face.
I took a course on Estate Tax Returns, the instructor said that every Federal Estate Tax Return that owes taxes is essentially audited. This is true at the State level as well. There are probably few Bogleheads that whose estates will owe Federal Tax but a lot more will owe State Estate taxes. My State has relatively low limits and family members in recent years had to file an Estate Tax Return for a deceased relative. It was quite a process.

What I don't know is how deep the process is or how far they go back. My sense is that the larger the estate, the harder they will dig. As others have said, the IRS isn't interested in auditing family vacations or weddings though technically they could. Leeway is given for routine transactions done within families. This is why professionals are such a big help, they know what the practices of the IRS and State Taxing Authorities are. So yes, technically the IRS could audit family weddings and vacations but in practice they don't.

The taxing authorities will check on the values of assets claimed on the return. Obviously, the Estate wants to minimize those values and the tax and the taxing authorities want to see that the assets are properly valued. Lots of things now are easier to check than they were twenty or thirty years ago. Things you could let slide in the past are more easily checked.

If one is making gifts that exceed the limits, it is a good idea to file the returns.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by skp »

snackdog wrote: Sun Feb 11, 2024 5:26 am
Small Law Survivor wrote: Fri Feb 09, 2024 3:58 pm ...

What if she gets married and we pay for the wedding? Do we have to file a gift return?
....
It depends. Some scenarios:
- You give your daughter a check for $50,000 and tell her you hope she uses it to defray wedding expenses or a vacation. Reportable.
- You give your daughter a check for $12.5k, your SIL $12.5k and your wife does same, for a total of $50k. Non reportable.
- You tell your daughter to plan a wedding or vacation and have the invoices (in her name) sent to you. You pay them and it totals $50K. Reportable.
- You tell your daughter you are planning a wedding or vacation and she is invited and you would welcome input on the arrangements. You plan the event and pay the invoices (which have your name on them) totaling $100k. Non reportable.
- You are on the Board of your local golf club. The club manager happens to offer your daughter use of the club for the wedding and reception, gratis, instead of the normal $50,000 fee. Possibly reportable?
I don't understand. In my eye, $50,000 is under the gift limits.
Why do I have to write 4 separate checks? It's the spirit of the law vs the letter of the law. Is the IRS really going to nit pick to this extent???
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by snackdog »

skp wrote: Sun Feb 11, 2024 9:23 am
snackdog wrote: Sun Feb 11, 2024 5:26 am
Small Law Survivor wrote: Fri Feb 09, 2024 3:58 pm ...

What if she gets married and we pay for the wedding? Do we have to file a gift return?
....
It depends. Some scenarios:
- You give your daughter a check for $50,000 and tell her you hope she uses it to defray wedding expenses or a vacation. Reportable.
- You give your daughter a check for $12.5k, your SIL $12.5k and your wife does same, for a total of $50k. Non reportable.
- You tell your daughter to plan a wedding or vacation and have the invoices (in her name) sent to you. You pay them and it totals $50K. Reportable.
- You tell your daughter you are planning a wedding or vacation and she is invited and you would welcome input on the arrangements. You plan the event and pay the invoices (which have your name on them) totaling $100k. Non reportable.
- You are on the Board of your local golf club. The club manager happens to offer your daughter use of the club for the wedding and reception, gratis, instead of the normal $50,000 fee. Possibly reportable?
I don't understand. In my eye, $50,000 is under the gift limits.
Why do I have to write 4 separate checks? It's the spirit of the law vs the letter of the law. Is the IRS really going to nit pick to this extent???
The gift limit for one recipient is $18,000 for one donor and $36,000 for a couple.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Lee_WSP »

skp wrote: Sun Feb 11, 2024 9:23 am
snackdog wrote: Sun Feb 11, 2024 5:26 am
Small Law Survivor wrote: Fri Feb 09, 2024 3:58 pm ...

What if she gets married and we pay for the wedding? Do we have to file a gift return?
....
It depends. Some scenarios:
- You give your daughter a check for $50,000 and tell her you hope she uses it to defray wedding expenses or a vacation. Reportable.
- You give your daughter a check for $12.5k, your SIL $12.5k and your wife does same, for a total of $50k. Non reportable.
- You tell your daughter to plan a wedding or vacation and have the invoices (in her name) sent to you. You pay them and it totals $50K. Reportable.
- You tell your daughter you are planning a wedding or vacation and she is invited and you would welcome input on the arrangements. You plan the event and pay the invoices (which have your name on them) totaling $100k. Non reportable.
- You are on the Board of your local golf club. The club manager happens to offer your daughter use of the club for the wedding and reception, gratis, instead of the normal $50,000 fee. Possibly reportable?
I don't understand. In my eye, $50,000 is under the gift limits.
Why do I have to write 4 separate checks? It's the spirit of the law vs the letter of the law. Is the IRS really going to nit pick to this extent???
Whether they'll catch you and care and what you're supposed to do are two different topics.

Same issue with the wedding gift. Use of a home is just not something anyone wants to take up and certainly wasn't contemplated when it was enacted, but as written, both are included.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by skp »

So you are saying technically I have to write two checks. My husband 2 checks. Is this correct? Good to know.
Adding. Can I use a joint checking account and put daughter and son in law both on check.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Walkure »

nedsaid wrote: Sun Feb 11, 2024 9:21 am I took a course on Estate Tax Returns, the instructor said that every Federal Estate Tax Return that owes taxes is essentially audited.
That seems like a crucial qualifier in the instructor's claim. Where things appear to get murky is when an estate has unreported taxable gifts in prior years, the remainder estate is under the federal exclusion, no taxes are owed on the return, but the estate would have been over the limit were it not for those previous unreported gifts, which may have happened 20 or 30 years prior.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by JoeNJ28 »

The amount of people advocating for breaking the law and not reporting gifts because they don’t like the rules is astounding. Rules for thee not for me.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Lee_WSP »

skp wrote: Sun Feb 11, 2024 10:09 am So you are saying technically I have to write two checks. My husband 2 checks. Is this correct? Good to know.
Adding. Can I use a joint checking account and put daughter and son in law both on check.
Yes.

A check is supposed to be written to only one person. The IRS's position according to MarkNYC is that a gift from a married couple's joint checking account can be treated as coming 1/2 from each person. This does not work if you aren't married, but again it goes back to the reporting vs compliance issue.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by bsteiner »

Walkure wrote: Sun Feb 11, 2024 10:32 am
nedsaid wrote: Sun Feb 11, 2024 9:21 am I took a course on Estate Tax Returns, the instructor said that every Federal Estate Tax Return that owes taxes is essentially audited.
That seems like a crucial qualifier in the instructor's claim. Where things appear to get murky is when an estate has unreported taxable gifts in prior years, the remainder estate is under the federal exclusion, no taxes are owed on the return, but the estate would have been over the limit were it not for those previous unreported gifts, which may have happened 20 or 30 years prior.
The executor is supposed to show those gifts on the estate tax return.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by 2cents2 »

bsteiner wrote: Sun Feb 11, 2024 10:56 am
Walkure wrote: Sun Feb 11, 2024 10:32 am
nedsaid wrote: Sun Feb 11, 2024 9:21 am I took a course on Estate Tax Returns, the instructor said that every Federal Estate Tax Return that owes taxes is essentially audited.
That seems like a crucial qualifier in the instructor's claim. Where things appear to get murky is when an estate has unreported taxable gifts in prior years, the remainder estate is under the federal exclusion, no taxes are owed on the return, but the estate would have been over the limit were it not for those previous unreported gifts, which may have happened 20 or 30 years prior.
The executor is supposed to show those gifts on the estate tax return.
I have a technical question regarding folks who have filed 709's. How does the executor know about previously filed 709's?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by PeninsulaPerson »

Stinky wrote: Sun Feb 11, 2024 6:41 am
TomatoTomahto wrote: Sun Feb 11, 2024 3:59 am
As for NH, our estate attorney loves the idea. I have to admit that I’ve looked at some Zillow listings, but I’ve got our MA house just as I like it.
Is your Massachusetts future estate tax burden so large that your (new) home in New Hampshire would be basically free? That is, paid for by your savings on state estate taxes for a resident of NH vs MA.

Food for thought.

Moving to NH in not a complete panacea!

TomatoTomahto - where does your estate attorney live?

Not commenting on your specific situation but NH has its issues too that have to be taken into account. Houses right over the border ("near" Massachusetts) are not inexpensive, tho' farther north they are less expensive than MA. Property taxes are significant. Even southern NH is colder ... and it's different from Massachusetts. Every state is a different. If you love your life in MA, be sure to factor in what you could lose to gain some estate tax benefits - tho' of course you may have people you want to benefit by your estate enough to change your life to do that. Also if Boston's medical resources mean anything to you (and they may not), moving further away may not be such a plus. Maybe you could gift more now and stay in MA, if that's your wish. Just a gifting/estate planning thought.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Kompass »

Something I’m not clear on how the recipient of a gift handles things on their end. Let’s say I gift someone $25,000 and I file a 709, what is the recipients obligation if any?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Doctor Rhythm »

Kompass wrote: Sun Feb 11, 2024 11:51 am Something I’m not clear on how the recipient of a gift handles things on their end. Let’s say I gift someone $25,000 and I file a 709, what is the recipients obligation if any?
No obligation. No need to report or pay tax on the gift.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by bsteiner »

2cents2 wrote: Sun Feb 11, 2024 11:13 am
bsteiner wrote: Sun Feb 11, 2024 10:56 am
Walkure wrote: Sun Feb 11, 2024 10:32 am
nedsaid wrote: Sun Feb 11, 2024 9:21 am I took a course on Estate Tax Returns, the instructor said that every Federal Estate Tax Return that owes taxes is essentially audited.
That seems like a crucial qualifier in the instructor's claim. Where things appear to get murky is when an estate has unreported taxable gifts in prior years, the remainder estate is under the federal exclusion, no taxes are owed on the return, but the estate would have been over the limit were it not for those previous unreported gifts, which may have happened 20 or 30 years prior.
The executor is supposed to show those gifts on the estate tax return.
I have a technical question regarding folks who have filed 709's. How does the executor know about previously filed 709's?
If the decedent left a surviving spouse, the surviving spouse will likely know.

The decedent's lawyer will probably have copies of them.

The decedent's accountant may have copies of them.

The IRS will have copies of them.

If the executor doesn't take them into account, the IRS may pick that up. That happened in one case. We asked the decedent's lawyer about gift tax returns and he sent us copies of the gift tax returns that he had prepared. They were consistent. The earliest one said that there were no prior gift tax returns. The IRS estate tax attorney said that there were prior ones. I told him that we had asked the decedent's lawyer and had attached what he sent us, but that if there were prior ones he should tell us how much additional estate tax we owed and we would have the executor pay it. It turned out that the decedent's accountant had done the previous ones but had forgotten about it.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by billaster »

Seems like it would behoove the IRS to change Form 709 to include cumulative gifts just like Form 8606 includes cumulative non-deductible contributions. It would be a lot easier than hunting back for decades old forms. Your latest form is always the most up to date.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by bsteiner »

billaster wrote: Sun Feb 11, 2024 2:47 pm Seems like it would behoove the IRS to change Form 709 to include cumulative gifts just like Form 8606 includes cumulative non-deductible contributions. It would be a lot easier than hunting back for decades old forms. Your latest form is always the most up to date.
It does.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by JazzTime »

cubs1999 wrote: Sat Feb 10, 2024 11:35 pm
Thank you for the link. I just read the Pro publica article and this segment summarized the thinking that you summarized:
https://www.propublica.org/article/harl ... superyacht

Beth Kaufman, a partner with Lowenstein Sandler who specializes in estate planning and a veteran of the Treasury Department’s Office of Tax Policy, said she’d counseled clients on the issue. After one couple took their extended family on an exotic vacation, she said, she helped them calculate the reportable costs and file a gift tax return.

However, taxpayers rarely report these sorts of trips, experts said. One important factor is that the IRS has no way of knowing about gifts like these unless they happen to be uncovered in an audit. The agency has also signaled no interest in scrutinizing these kinds of interactions. In fact, experts weren’t aware of any audits related to gifts of this kind.


There was a paper that was linked in the article that someone who really wants to go down this rabbit hole can download (I just read the abstract):
https://papers.ssrn.com/sol3/papers.cfm ... id=4449488
The latter cite refers to this paper:
https://deliverypdf.ssrn.com/delivery.p ... INDEX=TRUE
which is quite an interesting read. It posits several hypothetical examples and recognizes that the law is not settled.

Neither the tax code nor Treasury regulations provide clear guidance on whether these transfers are subject to the gift tax. Current statutory and regulatory silence suggests that lawmakers either have not considered these more complex scenarios or have declined to bring the tax law into family or family-like matters.
. . .
Advocates for nontaxation also will point out that gifts of luxury travel do not represent the transfer of an asset that will accumulate in value.
Therefore, they will say, it is more appropriate to treat luxury travel as a form of consumption. That argument has two iterations. The first is that the giver receives psychic satisfaction from providing hospitality to family or friends.
. . .
The second variation on the transfer-as-consumption argument will be that had Mother, Father, or Rich spent the same money on themselves instead of family members or friends, they would not owe any gift tax. The argument goes like this: If personal consumption is not subject to gift tax, then the fact that others are present during that consumption means there should be no taxable gift.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by mattsm »

rambogleas wrote: Fri Feb 09, 2024 10:39 pm
mattsm wrote: Fri Feb 09, 2024 9:52 pm It's my money's worth to have my children be present on a vacation. So I am paying for them to come for MY enjoyment and it's worth my money.

Easily justified as a family member, less so with a stranger...
Donors give for many reasons. Your enjoyment is a worthwhile and valid reason, but the definition of whether a transfer is a gift is not based on the donor's rationale for giving.

Quoting from the IRS stats of 2021 gifts (https://www.irs.gov/pub/irs-pdf/p5368.pdf): "Donors gave to 800,505 donees. Of these, almost 81.2 percent were relatives of the donor, including 52.4 percent who were their children."
Care to share a more relevant link besides stats explaining the IRS views?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by funxional »

JoeNJ28 wrote: Sun Feb 11, 2024 10:48 am The amount of people advocating for breaking the law and not reporting gifts because they don’t like the rules is astounding. Rules for thee not for me.
I agree. I think a lot has to do with misunderstanding the reporting vs the tax requirement.

The threshold for reporting is $17k. You would have to throw a lot of early serious BBQ to require reporting that for any individual.

The threshold for tax is millions (whether it drops or not). If you are giving that much away you have enough to make sure your taxes are correct.

There are plenty of posts about how to use trusts to limit estate taxes.

As for filing another form there are plenty. People filing 8606 to do the backyard [sic] Roth. This shouldn't be any different and again a once or twice thing unless you have enough money to make sure done right
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by Kompass »

Do we record the entire gift amount or just the amount in excess of the “tax-free gift“ of $18,000?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by doobiedoo »

rambogleas wrote: Fri Feb 09, 2024 9:30 pm
GP813 wrote: Fri Feb 09, 2024 8:05 pm I don't understand how taking your adult children on vacation is considered a gift, anymore than paying for fine dining for your entire family is.
If you replace "adult children" with "friends" or "strangers," does your understanding change?
If you did not pay for their vacation or their dinner, who would have needed to pay for them to go on that vacation or eat that dinner?
If someone does not pay for something of non-zero value, it's generally going to be a gift from the payer / giver to the recipient.
Let's take an example.

I own a 2BR timeshare in Hawaii. My cost to use that timeshare is to pay the annual maintenance fees [about $5k].
In fact I have to pay those annual fees regardless of whether I occupy the timeshare.
I am not paying any extra when my adult kids stay there with me.
I [and several others including the US Supreme Court in the 1984 Dickman case] are struggling with how that constitutes a gift.

Yes, I understand that one can "impute the equivalent cost" of the lodging. And that works fine when talking about government officials reimbursing their benefactors. But it seems wrong to file a gift return for my kids' vacation with me.
And the point for government officials is to avoid the appearance of undue influence, bribery, etc.

I will also say that we have been going to that timeshare for 24 years, long before my kids were adults.
Did something suddenly change when they were no longer dependents?

Now the timeshare cost in this example is well below the reporting threshold.
But I do give my kids actual gifts throughout the year. I gift appreciated shares of BRK stock, let's say $8k each.
And maybe I give them a $3k check at Xmas. If the vacation is a gift, we're getting close to the threshold.

And if they get married and I pay for the reception, am I over the reporting threshold that year?
Let's say the reception venue was a restaurant. There is no venue charge. The charge is per person and it pays for food, ambience, and venue. [Chinese restaurants actually do this.] Isn't my "gift" to the 150 attendees who got a free meal?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by funxional »

doobiedoo wrote: Mon Feb 12, 2024 1:46 am
rambogleas wrote: Fri Feb 09, 2024 9:30 pm
GP813 wrote: Fri Feb 09, 2024 8:05 pm I don't understand how taking your adult children on vacation is considered a gift, anymore than paying for fine dining for your entire family is.
If you replace "adult children" with "friends" or "strangers," does your understanding change?
If you did not pay for their vacation or their dinner, who would have needed to pay for them to go on that vacation or eat that dinner?
If someone does not pay for something of non-zero value, it's generally going to be a gift from the payer / giver to the recipient.
Let's take an example.

I own a 2BR timeshare in Hawaii. My cost to use that timeshare is to pay the annual maintenance fees [about $5k].
In fact I have to pay those annual fees regardless of whether I occupy the timeshare.
I am not paying any extra when my adult kids stay there with me.
I [and several others including the US Supreme Court in the 1984 Dickman case] are struggling with how that constitutes a gift.

Yes, I understand that one can "impute the equivalent cost" of the lodging. And that works fine when talking about government officials reimbursing their benefactors. But it seems wrong to file a gift return for my kids' vacation with me.
And the point for government officials is to avoid the appearance of undue influence, bribery, etc.

I will also say that we have been going to that timeshare for 24 years, long before my kids were adults.
Did something suddenly change when they were no longer dependents?

Now the timeshare cost in this example is well below the reporting threshold.
But I do give my kids actual gifts throughout the year. I gift appreciated shares of BRK stock, let's say $8k each.
And maybe I give them a $3k check at Xmas. If the vacation is a gift, we're getting close to the threshold.

And if they get married and I pay for the reception, am I over the reporting threshold that year?
Let's say the reception venue was a restaurant. There is no venue charge. The charge is per person and it pays for food, ambience, and venue. [Chinese restaurants actually do this.] Isn't my "gift" to the 150 attendees who got a free meal?
Given that the IRS guidance explicitly says "use of" I would say use of the timeshare is included. The difficulty here is asymmetric value; to them it replaces a cost but to you it doesn't change the cost.

More importantly this is NOT a level at which you would pay tax. If you give at that level for 100 years it's still well below the federal tax level.
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by JazzTime »

We can all opine about what is or is not a reportable gift, but the fact is the law is unsettled with respect to family sharing events. The legal paper I cited states exactly that after posting various hypotheticals. Until a gift is challenged by the IRS and ruled upon by a court, the law continues to be unsettled. You may wish to take a conservative approach and report a family vacation (wedding, etc.) as a gift. Another is free to take a more liberal approach and conclude a family vacation (wedding, etc.) is not a reportable gift. The determination is very fact dependent. This is no different than the varying approaches people take with respect to income tax returns. You may decide not to take a particular deduction while I may decide a similar deduction is appropriate in my case. Taking a different view when the law is gray is not fraud. Until the IRS challenges and wins, it's perfectly OK.

The reason there are so many posts about gifting is that there are no absolutely clear lines of demarcation. It gets pretty silly, down to "must I write two checks or is one check OK?" I strongly suspect the IRS has better things to do than to pursue such trivialities.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by bryanm »

02nz wrote: Fri Feb 09, 2024 10:45 pm
exodusNH wrote: Fri Feb 09, 2024 4:34 pm It always makes sense to comply with tax law.
+1. Seems a little strange to have to say this to OP, who appears to be a lawyer, but OK ...
"If there be no penalty annexed to disobedience, the resolutions or commands which pretend to be laws will, in fact, amount to nothing more than advice or recommendation." Alexander Hamilton
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by We're wolves »

snackdog wrote: Sun Feb 11, 2024 5:26 am
Small Law Survivor wrote: Fri Feb 09, 2024 3:58 pm ...

What if she gets married and we pay for the wedding? Do we have to file a gift return?
....
It depends. Some scenarios:
- You give your daughter a check for $50,000 and tell her you hope she uses it to defray wedding expenses or a vacation. Reportable.
- You give your daughter a check for $12.5k, your SIL $12.5k and your wife does same, for a total of $50k. Non reportable.
- You tell your daughter to plan a wedding or vacation and have the invoices (in her name) sent to you. You pay them and it totals $50K. Reportable.
- You tell your daughter you are planning a wedding or vacation and she is invited and you would welcome input on the arrangements. You plan the event and pay the invoices (which have your name on them) totaling $100k. Non reportable.
- You are on the Board of your local golf club. The club manager happens to offer your daughter use of the club for the wedding and reception, gratis, instead of the normal $50,000 fee. Possibly reportable?
so you're essentially saying the distinction of whether or not you need to file a gift return for your daughter's wedding that you paid for is whether you or her planned it? How exactly are you supposed to document that? Or are you just saying it's who's name is on the invoices?
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Re: Who In Their Right Mind Files Gift Tax Returns? And Why?

Post by We're wolves »

Lee_WSP wrote: Sat Feb 10, 2024 8:03 pm
FireSekr wrote: Sat Feb 10, 2024 7:34 pm
Lee_WSP wrote: Sat Feb 10, 2024 7:12 pm
doobiedoo wrote: Sat Feb 10, 2024 7:09 pm
LadyGeek wrote: Sat Feb 10, 2024 12:20 pm The IRS definition is here: Gift tax | Internal Revenue Service
JazzTime wrote: Sat Feb 10, 2024 2:46 pm If I invite a couple to my home or to my luxury vacation home .. to share time with me, I have not transferred any property. ..
In my view, that is a different situation than if I rent a beach cottage and let them use it by themselves for a month.
In that case, I have transferred rental property to them. ..
Lee_WSP wrote: Sat Feb 10, 2024 1:18 pm Weddings, dinners, and vacations are most certainly gifts. ..
@Lee_WSP: Is there case law or IRS rulings to support your statement?
Based on LadyGeek's post of the IRS definition, it seems like JazzTime has an argument about whether at lerast some weddings, dinners and vacations are gifts.
  1. I assume in these cases that there is no direct transfer of property to the presumed giftee (bride, groom, child, etc.). Payments were made to the restaurant, caterer, grocery store, florist, etc.
  2. For a wedding reception, are all the guests giftees? They are all getting a free dinner.
I don't need case law. See the definition. Transfer for less than valuable consideration. Its quite clear. Just because you don't like it doesn't mean it isn't clear.
So who is it a gift to? If a father spends $200k on a wedding, the gift wouldn’t be to the child because the child isn’t consuming $200k of property. If the wedding was $1,000 per guest and there were 200 guests, wouldn’t the gift be $1,000 to 200 separate people since each guest is theoretically getting $1k in value? It’s not a $200k gift to the couple getting married, it’s a gift to each of the guests
The child because the child would otherwise be paying for it. That's easy.

Your hypo to catch me would be "is the child then regifting it to all the guests?" To which the answer is maybe. It technically is, but there's no case law on that one.
No they wouldn't, because they couldn't afford it. They would be throwing a backyard bbq with 50 of their closest friends, not a 350 person formal dinner with great aunt Tilda in attendance. My position is that you are throwing a party in which your child and their spouse are the guests of honor, and to the extent there is a gift here, it is a gift from you to each attendee paying for their food and drinks.
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