I read that the receiver of a gift let say $50000 doesn't have to pay taxes on it, is this true?

Question

If this is true, remember when Oprah gave away all those cars, but some of the people who received them could not keep the cars because they couldn't afford the taxes? Which one is correct?

Answer 1

Both are correct.

The recipient of a bona fide gift does not pay any tax on the gift. The donor is responsible for payment of the Gift Tax.

Oprah's "gifts" are not considered bona fide gifts since Oprah received substantial benefit (publicity) from giving them away. They are treated as prizes and are fully taxable as ordinary income by the winner of the prize.

Answer 2

The cars were apparently looked on by the IRS as prizes, not as gifts. Receiving a prize is taxable, receiving a gift isn't.

Receiving something is only considered a gift if the giver does not expect to receive something in return. Oprah did receive substantial publicity over the cars given to audience members.

Answer 3

The Gift Tax is supposed to be paid by the giver, not the person who gets the gift. There is an amount that is tax free each year. The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2005 and $12,000 in 2006, the annual exclusion applies to each gift.

Oprah was not giving a gift. It was a prize, prizes are fully taxable.

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Answer 4

You have to pay a gift tax