Estate
& Gift Taxation
Gift
Taxes
For
tax purposes, a payment is a gift if it is made without conditions
and the giver does not expect an economic benefit/consideration.
A gift tax return is required to be filed if a donor has made a
single gift over $12,000 to an individual or several gifts to an
individual totaling over $12,000 annually or if a gift to a non-citizen
(permanent resident) spouse exceeds $125,000. If a donor is neither
a U.S. citizen or permanent resident, then the gift tax will apply
only to transfers of property located in the U.S.A. A gift of more
than $100,000 received from a foreign individual is subject to
the gift tax reporting requirements. Gift tax returns are due annually
by April 15 and they are subject to the same interest and penalties
for failure to file and pay taxes as other tax returns. Filing
a gift tax return and payment of the tax due are the responsibility
and liability of the donor.
The
following gifts are not reportable on the gift tax return.
 |
Gifts to charitable organizations |
 |
Medical and education expenses paid directly to
the providers on behalf of an individual |
 |
Political contributions |
Gift
tax returns should be held indefinitely because the value of the
gifts stated therein would have to be used to prepare the estate
tax returns when the donor dies.
Estate Taxation
For
tax purposes, the estate of a decedent can be defined as the aggregate
interest a decedent has in real and personal property in the U.S.A.
and other countries on the date of death. The appraised/fair market
value of property that a decedent owns on the date of death is subject
to estate taxes as it passes on to survivors (IRC section 1014).
This is called the gross estate. A taxable estate is the gross
estate reduced by the amount of deductible funeral and administrative
expenses, claims and charges against the estate, casualty losses,
charitable bequests, and bequests to the surviving spouse. You
can pay the funeral expenses on behalf of a decedent and file a
claim to recoup your money from the estate. If the deceased had
died broke, then you are out of luck. You cannot take a tax deduction
on your personal tax return for funeral expenses that you paid
on behalf of a decedent.
An estate
tax return must be filed within nine months after the death of
the decedent. The executor/administrator of the estate as defined
in section 2203 has a non-delegable duty to file the tax returns
on time. Section 2002 makes the executor fully responsible for
paying the estate tax and it does not matter if the executor must
use his/her own funds to pay the tax. Section 6651(a)(1) imposes
a minimum penalty of 5% and a maximum aggregate penalty of 25%
for each month that the tax is in arrears unless failure to pay
on time was due to reasonable cause.
Testimonial
"I experienced
the sudden loss of my mom in 2005. My attorney referred me to an
accountant who prepared the estate tax returns. Three years later,
I was informed by New York State that the returns were incomplete.
I took my documents to Barry's Accounting Services and I was very
happy with the results. Thanks Barry."
-
Shaun Frederick
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