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In: Accounting

Evelyn gave a Flymore sailplane to her husband who is an enthusiast of this sport for...

Evelyn gave a Flymore sailplane to her husband who is an enthusiast of this sport for their wedding anniversary. Purchase cost was $37,000. She used her own funds from a separate checking account. What is the value of the gift?, Does the gift have to be reported? , What is the limit on a gift between spouses?

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Expert Solution

Answer :

The value of the gift will be the purchase cost i.e. $37000

Yes, the gift have to be reported but it will not be taxable.

It is the person who gives the gift who is subject to the tax and has to report it to the IRS.

The gift that you received is not considered income but could have some gift tax liability for the giver.

Because this was a gift, it needs to be reported by the person giving the gift. The person receiving the gift does not report it.

Technically, relatively small gifts can completely avoid gift tax. Any one person can gift someone up to the allowable annual exclusion, which is $13,000 for 2012 ($14,000 in 2013), and not incur a tax or any filing requirement.

Limit on a gift:

the IRS understands that some gifts are necessary and therefore excluded from the gift tax. There are unlimited exclusions (they are never taxable) for the following gifts:

Charitable gifts
Gifts to political organizations
Gifts between spouses
Educational and medical gifts (see explanation below)

To receive the exclusion for the educational and medical gifts, you must give this gift directly to the medical or educational institution. For example, if your aunt is having surgery that will cost $50,000 and you want to provide your aunt the money for the surgery, you must give the $50,000 directly to the hospital. You may not give this money to your aunt or you will be subject to gift tax on the amount that exceeds $14,000. This same rule applies for educational gifts (for example, if your friend or brother was attending college).

Therefore their is no limit on a gift between spouses.

ekkarill92 answered 1 year ago
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