15 May Gifts – Beware Capital Gains Tax May Be Payable
A gift is offered to someone without expecting something in return. In such a case, it seems implausible that a gift would cause capital gains tax liability. Therefore, gifts – beware capital gains tax may be payable.
While the person receiving the gift will generally need not meet any obligations, the individual that gives has to meet some payment to the tax authorities when the item exceeds the exclusion amount.
Transfers between married persons are considered to have no gain or loss and thus are not taxable despite the amounts that are involved. However, the partners should have lived together during the year when the gift was transferred, and it should not be a good for resale.
However, when the item that is transferred to any of the spouses is later on disposed of, the seller will have to meet the taxation amount. This amount should cover the accumulated gains over the period of ownership, which starts from when the grantor acquired it.
Where transfers are made to charity, the giver will not be liable for any taxation. There are no benefits to the grantor, and the gains that the charity makes are deemed non-taxable.
Monies paid to educational facilities for fees or to medical institutions are also not liable to any taxation. This is the case even where the receiver is not related to the giver in any way.
The family home can be transferred to a son or daughter without the inconvenience of incurring any taxes. However, the grantor has to live for at least seven years and start paying market rent on the property. If the grantor continues to live in the property after the transfer, it remains a part of the estate. In such a case, it attracts the market value after the giver passes on.
Tax matters have great implications and are complex in many cases. When it comes to gifts, it is essential to engage qualified accountants or financial advisors for the best advice. This way, you will know what should be paid and when to make such returns to the tax authorities.