A taxpayer sent money to support her non-resident parents in a foreign country monthly. The total for each of her parents is more than $12,000 in 2006. Is she required to file a gift tax return?
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Yes, she is required to file a gift tax return. -
Thank you for your answer. That's why I am so confused about the gift tax law. What about if you support the living expenses of your parent in the US and if the amount is more than $12,000 for the whole year. Do you have to file a gift tax return too? What about if the parent is also your dependent. So if you are required to file a gift tax return, it means the support is considered gift. Correct? Does that mean you can't claim the parent as your dependent then? Where do they draw the line between living expenses support and gift?
What about if you support your 15 years old son. You spent more than $12,000 on him for the whole year. I hope no one will say you need to file a gift tax return too. =)Last edited by QuickTaxQuestion; 03-30-2007, 12:40 PM.Comment
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Boy, you got me here. My focus was on sending money to a foreign country, not on the support issue. I am as confused as you and hope someone will come to our rescue. I never thought about this.Comment
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Well, may be you have answered my main question already. Do you mean anyone has to file a gift tax return if they send money oversea, whether it was for living expense support or not? If yes, does he still need to file the gift tax return if the year total is less than $12,000? Thank you very much for your help.Originally posted by Gabriele View Post
As for the side question about where they draw the line, I am as curious as you to find out more about it. =)Comment
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Any taker of my question? Thank you in advance.
Quicktaxquetion <-- desperately looking for advice. =)Comment
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To start with, quote from the IRS website
If you give your son over $12,000 dollars to spend as he likes, then I would call that a gift,The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced interest loan, you may be making a gift.
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
· Gifts that are not more than the annual exclusion for the calendar year.
· Tuition or medical expenses you pay for someone (the educational and medical exclusions).
· Gifts to your spouse.
· Gifts to a political organization for its use.
· Gifts to qualified charities (a deduction is available for these amounts).
If you give someone money or property during your life, you may be subject to federal gift tax. The money and property you own when you die (your estate) may be subject to federal estate tax. The purpose of this web page is to give you a general understanding of when these taxes apply and when they do not. It explains how much money or property you can give away during your lifetime or leave to your heirs at your death before any tax will be owed.
Most gifts are not subject to the gift tax and most estates are not subject to the estate tax. (Only about 2% of all estates are subject to the estate tax).
Generally, you do not need to file a gift tax return unless you give someone, other than your spouse, money or property worth more than the annual exclusion ($11,000 in 2002, 2003, 2004 and 2005; $12,000 beginning in 2006) for that year. Although a return may be required, no actual gift tax will become payable until the cumulative lifetime taxable gifts exceed the applicable exclusion amount. The donor is primarily responsible for the payment of the Gift Tax.
but if you are spending money on his support, like paying his room and board, then I wouldn't call that a gift.Comment
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Thank you. I take it to mean that if you pay for the health insurance, rent and foods, tuition, etc for your son, then it's not gift. But if you write a check to your son and tell him to spend it as he likes, then it's gift.Originally posted by Gene V View Post
Do you know the answer to my other question? If the taxpayer sent money to her parent in a foreign country, does she need to file a gift tax return if the amount is less than $12,000 in the whole year?Comment
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I would say no, if the money was less than $12,000.Do you know the answer to my other question? If the taxpayer sent money to her parent in a foreign country, does she need to file a gift tax return if the amount is less than $12,000 in the whole year?Comment
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claim him as a dependent
>>If you give your son over $12,000 dollars to spend as he likes, then I would call that a gift, but if you are spending money on his support, like paying his room and board, then I wouldn't call that a gift.<<
Under the the rules for both qualifying child and qualifying relative, EVERYTHING the child spends money on is considered equally as support. It could be rental value of lodging or it could be video games. So if you give him more than $12000 and he blows it all playing World of Warcraft, you couldn't claim him as a dependent, right?Comment
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OK, Jainen, was is your take on the issue what is considered support and what a gift? Does the gift tax issue only come into play if you don't have the classic dependent scenario? Whatever that is.Originally posted by jainen View PostComment
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it doesn't work
>>Jainen, was is your take on the issue <<
Oh, no, it doesn't work that way. You see, I'm the one who asked the question, so I'm home free. Somebody else has to answer it.Comment
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Come on, Jainen. I am just asking about your opinion, you surely have that.
By the way, why do I have the impression that your question was rather ironic. No home free.Comment
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ungrateful brats.
>>Come on, Jainen. I am just asking about your opinion, you surely have that<<
Me have an opinion? You think?
Well, speaking from experience, for my own kids it's all support. Excessive support. Not a gift. I ain't givin' 'em nothin', the ungrateful brats.Comment
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