Gift over $12,000: Does the RECIPIENT have to pay regular income taxes on the gift?

Question

I know that the giver my have to file a gift tax form for gifts over $12000, but does the RECIPIENT of a gift over $12000 have to pay normal income taxes on that gift?

Answer 1

Income tax is not affected by gifts. Neither the Donor nor the Recipient will have their income tax affected.

Gift tax may apply in some cases.

According to Form 706 instructions, the Donor is responsible for paying the tax, but the Recipient may be required to pay the tax if the Donor does not. Also, the Recipient is allowed to pay the gift tax on behalf of the Donor, if they want to do so.

http://www.irs.gov/pub/irs-pdf/i709.pdf

The Donor must report the gift over $12,000, but in most cases where gifts are given, there will not be any tax due.

For example, there are exceptions to the $12,000 amount where no tax is due, such as paying someone's tuition or medical expenses on their behalf. Gifts to one's spouse are not taxable.

http://www.irs.gov/newsroom/article/0,,id=107815,00.html


IRS Publication 950 reviews the Gift Tax rules.

In addition to the annual exclusion, each person is allowed a lifetime exclusion credit (Unified Credit) of $345,000. The Donor would subtract the tax amount due, on the portion of the gift over the $12,000 annual exclusion, from their credit.

From IRS Pub 950:
"Example. In 2006, you give your niece, Mary, a
cash gift of $8,000. It is your only gift to her this year. You
pay the $15,000 college tuition of your friend, David. You
give your 25-year-old daughter, Lisa, $25,000. You also
give your 27-year-old son, Ken, $25,000. Before 2006,
you had never given a taxable gift. You apply the exceptions
to the gift tax and the unified credit as follows:
1. Apply the educational exclusion. Payment of tuition
expenses is not subject to the gift tax. Therefore,
the gift to David is not a taxable gift.
2. Apply the annual exclusion. The first $12,000 you
give someone during 2006 is not a taxable gift.
Therefore, your $8,000 gift to Mary, the first
$12,000 of your gift to Lisa, and the first $12,000 of
your gift to Ken are not taxable gifts.
3. Apply the unified credit. The gift tax on $26,000
($13,000 remaining from your gift to Lisa plus
$13,000 remaining from your gift to Ken) is $5,120.
You subtract the $5,120 from your unified credit of
$345,800 for 2006. The unified credit that you can
use against the gift tax in a later year is $340,680.
You do not have to pay any gift tax for 2006. However,
you do have to file Form 709."

Answer 2

In the UK an outright gift won't be taxed as income or as a capital gain etc so your mother would not have any UK liability. IHT could be an issue, but you seem to have this covered. If the figures are significant HMRC might show an interest in the ultimate source of the gift - the story that payments into bank accounts are gifts from family is not uncommon when people are being investigated. If your source of the money can be explained, no problem.

Answer 3

A gift is not taxable to the recipient. A gift over the current annual exemption amount may be taxable to the donor, however in most cases even though a gift tax return (form 709) may be due, generally no tax is due since the donor has a lifetime exemption of $1m (or it could be $1.5m - not exactly sure on the amount).

Answer 4

NO - it's a gift. the giver has to report and pay any tax.

But a forgiven debt may be considered income to the debtor, not a gift.

Check out IRS Pub 950.

Answer 5

The recipient never pays taxes on gifts. The donor might or might not have to.

Answer 6

Recipients never pay taxes on gifts received. Even if $100,000.

Answer 7

Not the recipient but the giver has to pay taxes

Answer 8

Gifts over $11,000 in one year are taxable for the recipient, not the giver.