Question

In the current year, John gives $140,000 of land to John, Jr. In the current year, John's wife gives $170,000 of land to Andy and $52,000 cash to John, Jr. Assume the couple elects gifts splitting for the current year and the current year is 2016. What are the couple's taxable gifts? How would your answer to Part a change if John's wife gave the $52,000 of cash to Larry (instead of to John, Jr.)

Answer 1

Answer:

As per the income tax act 1961,

If a person gifted an asset or cash or asset to his son, it is not taxable as the son covered under “Relative”.

A person gifted an asset or cash to any other than the relative, it is taxable in the hands of recipient only if the value of the gift exceeds $50000.

The income arising from the gift given by father to his son, it is taxable in the hands of Father provided the son is a minor (minor –who has no ability to earn money).if the son is capable of earning then it is taxable in the hands of the son only.

In the given case,

John Gives $140000 of land to his son John Jr, As the son is covered under the relative it is not taxable but the income arising from the land is taxable.if the son is minor it is taxable in the hands of John otherwise John, Jr is liable to pay tax on his income.

John’s wife gives $170000 to Andy, As the Andy is not covered under relative and the gift value exceeds $50000, it is taxable in the hands of Andy only.

John’s wife gives $52000 cash to John, Jr, As he is covered under the relative, it is not taxable.

If John’s wife gives $52000 cash to Larry instead of John Jr, it is taxable in the hands of Larry as he is not covered under relative and the value of the gift is more than $50000.

The John Jr’s(if Minor) income also clubbed with the mother or father whose income is higher.