Taxable Income & Gifts: Am I Screwed? PART ONE
So, from my previous post we know that gifts and inheritances are NOT usually taxable.
... But the fine print here is that you still must report the gift and it may be taxable if it exceeds certain amounts.
Why might it be taxed?
Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift. It is taxable if it exceeds $12,000, $24,000 if married filing jointly.
Gifts That Are Never Taxed
- tuition or medical expenses you pay directly to an educational or medical institution for someone’s benefit
- gifts to your spouse
- gifts to a political organization
- charitable donations
To put it simply, taxable on the amount that's over 2 million for a year of death in 2006 or 2007. Report inheritance on a 1041 K-1.
If you pass on stocks or mutual funds, the tax burden is then transferred to the new owner. Simple as that!
See here for direct info from the IRS on Estate and Gift Tax. For more general info on gift tax from the IRS see here.
And, as always (and especially in this case), consult your tax professional (please!).