For Tax Year 2009 the maximum gift that a donor can make to a non-related minor child in an UGMA account is
A. $11,000
B. $12,000
C. $13,000
D. None of these choices
EXPLANATION: don't jump to conclusions! Sometimes test questions try to mislead you. You're supposed to start thinking about the annual gift tax exclusion amount, which was $12,000 for 2008 and is $13,000 for 2009. That only has to do with gift taxes. If you give someone more than $13,000 this year, you pay gift taxes on the excess above $13,000, which has absolutely nothing to do with this question. There is no such thing as a "maximum gift" for an UGMA account.
ANSWER: D
Showing posts with label gift tax. Show all posts
Showing posts with label gift tax. Show all posts
Wednesday, May 13, 2009
Sunday, February 1, 2009
Gift tax question
QUESTION: Taxation question (loophole or just plain bad news?): If Parents of client want to give money to their child, can they give it by paying off things like the child's house, car, etc? Or will it be subject to taxes?
RESPONSE: One the one hand, parents can give their children as much money as they want--but if they give more than the "annual gift tax exclusion," the excess is subject to gift taxes. For 2008, the maximum was $12,000; for 2009, it's $13,000. So, if the parents give each child $13,000 this year, there is nothing to file, and no gift taxes to pay. If they give them $100,000 each, the excess is subject to gift tax rates. Paying off a car loan would not qualify for an exception to gift tax rules, as far as I know--though I'm not a CPA or tax professional. The exceptions that the test might bring up would include paying someone's tuition or medical expenses--these don't count as gifts as long as the payment is made directly to the education or medical provider. So, to wrap up--if the "kid" owes $13,000 on the car, the parents can either pay the holder of the loan or give the "kid" $13,000. They don't have to worry about gift taxes based on the size of the gift. The purpose of the gift isn't relevant here. If the loan is more than $13,000, though, the excess above the annual gift tax exclusion is subject to gift taxes. Also, if husband and wife file separately on their income taxes, they can each give the kid $13,000. See http://www.irs.gov/ and search on "gift taxes," for more information on that. Just wondering, have the parents considered letting their kids pay their own damned bills? There are charities that try to cure cancer, help the homeless, feed the hungry, etc. Not really what you're asking, of course, and probably not what your clients would want to hear. It probably does explain why I don't work directly in the financial services industry--not sure that clients would want to hear the unvarnished truth and sarcasm never seems to work successfully as a sales tool.
RESPONSE: One the one hand, parents can give their children as much money as they want--but if they give more than the "annual gift tax exclusion," the excess is subject to gift taxes. For 2008, the maximum was $12,000; for 2009, it's $13,000. So, if the parents give each child $13,000 this year, there is nothing to file, and no gift taxes to pay. If they give them $100,000 each, the excess is subject to gift tax rates. Paying off a car loan would not qualify for an exception to gift tax rules, as far as I know--though I'm not a CPA or tax professional. The exceptions that the test might bring up would include paying someone's tuition or medical expenses--these don't count as gifts as long as the payment is made directly to the education or medical provider. So, to wrap up--if the "kid" owes $13,000 on the car, the parents can either pay the holder of the loan or give the "kid" $13,000. They don't have to worry about gift taxes based on the size of the gift. The purpose of the gift isn't relevant here. If the loan is more than $13,000, though, the excess above the annual gift tax exclusion is subject to gift taxes. Also, if husband and wife file separately on their income taxes, they can each give the kid $13,000. See http://www.irs.gov/ and search on "gift taxes," for more information on that. Just wondering, have the parents considered letting their kids pay their own damned bills? There are charities that try to cure cancer, help the homeless, feed the hungry, etc. Not really what you're asking, of course, and probably not what your clients would want to hear. It probably does explain why I don't work directly in the financial services industry--not sure that clients would want to hear the unvarnished truth and sarcasm never seems to work successfully as a sales tool.
Subscribe to:
Posts (Atom)