Is That Gift Taxable?

Gift tax background removedThat nice check you sent to your niece when she graduated from college, and that plot of land you gave to your brother-in-law so he could build a vacation home – both could result in you having to pay a gift tax. But the donation you made to your favorite charity should not result in your getting a tax bill.

While some gifts are not subject to the gift tax, there are many more gifts that will end up costing you more than their value in the form of a gift tax. Here is a brief overview to help you determine which gifts may be subject to the gift tax, and which can be given freely. Continue reading

Update on “Formula Gifting”

formula giftingFor taxpayers who make gifts this year, we have been strongly recommending they consider using the “formula gifting” mechanism. The formula gifting mechanism can be used to avoid any increase in the  amount of gift tax in the event the value of the gift is challenged by the Internal Revenue Service.

This gifting process is based on the Tax Court’s Wandry v. Commissioner, T.C. Memo. 2012-88 (2012) case. Recently the IRS withdrew their appeal of the Wandry case in the 10th Circuit Court of Appeals and the case was dismissed. Continue reading

Formula Gifting – A New Concept

Many people are considering making substantial gifts to their children or grandchildren this year to take advantage of the current, historically-high lifetime gift tax exclusion.  There is a new approach to consider: “Formula Gifting”.  Continue reading

A Major Win for Gift Tax Valuation

A recent tax court decision, Wandry v. Commissioner, T.C. Memo 2012-88, found that a gift can be made indicating an amount of assets rather than what the assets are.  The taxpayers made a gift to their children and grandchildren in an LLC based on a specific dollar amount rather than a percentage of the LLC.  Although this may not sound like much of a difference, there is an important distinction between the two.  Simplistically, what it accomplished is that if the IRS was able to challenge and change the valuation of the percentage of the LLC gifted, the percentage would change and the taxpayer would not incur any additional gift tax exposure.  This means that regardless of the eventual findings, the IRS could not collect additional taxes. Continue reading