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1 when is a gift taxable on Sun May 03, 2009 10:11 pm

gypsy


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http://www.usnews.com/usnews/biztech/articles/060828/28webtax.htm




When is a gift taxable?
By Leonard Wiener
Posted 8/28/06

We're all familiar with the warning to beware of strangers bearing gifts. The IRS wants us to also beware of employers, relatives, and others.

The latest dust-up over the taxation of the posh gift packages that some celebrity participants get at the Academy Awards and the Emmys highlights the suspicious eye of the IRS when it decides whether income tax should be paid on the value of a gift.
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The rule of thumb: A gift given out of affection, respect, or other generous motivation with no consideration of payback in the form of past or future work, promotional activity, or other benefit is not taxable income to the recipient.

Gifts between family members generally fall into that category-your own feeling of any implied obligation notwithstanding, says Thomas Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants.

But a grab bag of jewelry, clothes, trips, and other "gifts" from merchants and others wanting to associate their goods and services with stylish celebrities? That's compensation for at least indirect services rendered, says the IRS in a revved-up drive to force the givers to report the value of the items given and the recipients to pay income tax on that amount-which some trade reports estimate at about $30,000 at the Emmys and $100,000 at the Oscars.

Gifts from an employer to a employee? Within limitations, noncash awards-perhaps a watch, golf clubs, or a TV-are allowed tax free to reward longevity or safety achievements. Small items such as a holiday ham-but not a gift certificate-can pass muster as too small to worry about.

But a gesture of gratitude, in cash or goods, for great work the past year or to spur efforts in the future? That is taxable, says the IRS.

To make a nontaxable gift in situations other than those expressly allowed by IRS rules, an employer must act out of "pure and unselfish motives of affection, admiration, or charity," cautions the J. K. Lasser tax guide. That's a hard nut to crack.

What concerns the IRS is that gifts and awards gone wild could become a loophole through which taxable compensation is masked as ever larger nontaxed gifts. "The gift basket industry has exploded," said IRS Commissioner Mark Everson in explaining the attention this year to celebrity perks.

The upshot of the IRS offensive: a decision by Hollywood to not offer gift bags at next year's Academy Awards and a requirement at the Emmys this year that all recipients fill out W-9 forms on which they provide their Social Security numbers.

Even untaxed gifts between family members can have a hidden bite that may not be apparent for years, notes Ochsenschlager. Take a grandfather who gives stock to his






granddaughter. Though there's no immediate income tax on the gift, there may be a large liability when the securities are sold. That's because profit on the sale will generally be measured from when granddad acquired the shares, and that accrued profit will be taxable to the granddaughter.

To rely on another cliché, you don't want to look a gift horse in the mouth. Just don't be surprised if there's a tax bill involved.

2 Re: when is a gift taxable on Sun May 03, 2009 11:41 pm

Guest


Guest
Well,thanks for this.

3 Re: when is a gift taxable on Mon May 04, 2009 11:41 pm

rosco 357


Veteran
well i had a tough day. but i thought we were talking about gifts to government official, and elected official, not civilian or movie stars, but maybe i missed something, on another post, that changed it,

4 Re: when is a gift taxable on Tue May 05, 2009 2:23 am

Guest


Guest
rosco 357 wrote:well i had a tough day. but i thought we were talking about gifts to government official, and elected official, not civilian or movie stars, but maybe i missed something, on another post, that changed it,
Hmmm. I posted that gifts are taxable and they are,but with exceptions. When I said gifts to employees were taxable,I posited the common sense deduction that employers could NOT claim gifts were not income and then "give" his employees a nice gift every week and leave them with no tax obligation. That is true,but one can give another a gift of basically any value (up to $325,000/year) and not obligate that person to pay an income tax on it IF the giver has no financial obligations towards that person. If the giftee sells the gift,it becomes taxable income. My example on another thread of an employer giving a gold watch to an employee being a taxable transaction,is wrong. The IRS spells it out pretty clearly. Retitrement gifts,safety awards,and achievement awards are not taxed. If a shoe manufacturer were to gift Michelle a $540 pair of ugly shoes he cannot claim it as an expense but clearly if it was done,it was done to publicise the shoes. Obviously,we have too much time on our hands. I got the point of yer original post. It doesn't surprise me to see Michelle wearing a $540 pair of designer shoes to a soup kitchen. I'm sure she had no idea what they cost and didn't care anyway. I wouldn't (but I don't wear designer shoes.)

5 Re: when is a gift taxable on Tue May 05, 2009 2:34 am

SSC


Admin
They were still butt ugly shoes..........

6 Re: when is a gift taxable Today at 5:40 am

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