Question

Juan and Marion, who are married, make the following transfers during 2015: $42,000 of cash to their son; a car valued at $4,000 to the same son (why can’t he buy his own car?); $30,000 to pay their niece’s tuition at college, $45,000 to pay for Juan’s dad, Carlos, emergency surgery, and $80,000 to the Newsome for Governor 2018 campaign. What will be the total amount of taxable gifts made by Juan and Marion?

a.      $18,000

b.     $46,000

c.      $201,000

d.     $0

Answer 1

The following gifts are not taxable gifts:

• Gifts that are not more than the annual exclusion for the calendar year
• Gifts to a political organization for its use
• Gifts to charities
• Gifts to one's (US Citizen) spouse
• Tuition or medical expenses one pays directly to a medical or educational institution for someone. Donor must pay the expense directly. If donor writes a check to donee and donee then pays the expense, the gift may be subject to tax

Further, gifts of up to the annual exclusion ($14,000 per recipient in 2013, 2014, 2015, 2016 and 2017) incur no tax or filing requirement. By splitting their gifts, married couples can give up to twice this amount tax-free.

Hence, in the given case,

1. Taxable amount on cash and Car Given to son = 42000+4000-(14000*2) = 18000

2. Taxable amount on Niece Tution - Nil (since direclty transferred to college)

3.Taxable amount for Medical expenses - Nil (since directly paid to medical instituion)

4. Taxable amount on Gift to Political party - Nil

Hence the correct answer is a. $18,000