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Gift taxes

 
 
Reply Sun 6 Apr, 2008 09:06 am
Question I have just learned that it is the giver and not the receiver of the gift who pays the tax. Huh? What could be the rationale and logic for this? The giver is not acquiring additional income -- it is the recipient of the gift who is acquiring additional income.

I'm really baffled, and thanks to all in advance for a simple explanation.

Confused Shocked
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JPB
 
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Reply Sun 6 Apr, 2008 09:26 am
It's so that the giver can't shelter taxable income from investments by claiming them as gifts. Gift taxes only kick in with gifts of $10,000 or more to any one individual per year. In the case of jointly owned assets, each owner can gift $10,000 to the same individual.

For example, children are taxed at a much lower rate than adults because their income is typically only from investments. Each parent can 'gift' each child $10,000 per year ($20,000 per child) so that income generated by those investments are taxed at the child's rate rather than the higher rates of the parents.
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