Complete all the paperwork for gifts
Tax Tip of the Week
November 17, 2014
Complete all the paperwork for gifts
Will you be giving gifts to family members or others before year-end? Be sure to complete the paperwork you'll need to file a gift tax return next April.
Here are two suggestions.
- Appraisals. Gifts are valued at fair market value at the time you give them. In some cases, such as when you gift real estate or interests in your closely held business, reporting the correct value means getting a current appraisal, which can take time. Be aware that the appraiser you hire must meet certain requirements. In addition, the report you receive must contain specific details, including an explanation of the appraisal procedures followed. The appraisal will be filed with your gift tax return.
- Crummey letters. These written notices inform trust beneficiaries of their right to withdraw some or all of the gifts you contribute to a trust. As you probably know, an "annual exclusion" applies to most gifts. The exclusion is the amount you can give to a single donee each year with no gift tax liability. (For 2014, the annual federal gift tax exclusion is $14,000.) However, the annual exclusion applies to gifts of "present interests." That term means the gift can be possessed, used, or enjoyed now, instead of sometime in the future. Contributions to trusts generally are not present interests. But granting beneficiaries a specified time period, such as 30 days, to make withdrawals allows your contributions to meet the present interest definition and qualify for the annual gift tax exclusion. Other documents you may need include copies of trust agreements, corporate balance sheets, and life insurance statements.
Please give us a call. We'll help you get the paperwork in order.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2014
November 17, 2014
Complete all the paperwork for gifts
Will you be giving gifts to family members or others before year-end? Be sure to complete the paperwork you'll need to file a gift tax return next April.
Here are two suggestions.
- Appraisals. Gifts are valued at fair market value at the time you give them. In some cases, such as when you gift real estate or interests in your closely held business, reporting the correct value means getting a current appraisal, which can take time. Be aware that the appraiser you hire must meet certain requirements. In addition, the report you receive must contain specific details, including an explanation of the appraisal procedures followed. The appraisal will be filed with your gift tax return.
- Crummey letters. These written notices inform trust beneficiaries of their right to withdraw some or all of the gifts you contribute to a trust. As you probably know, an "annual exclusion" applies to most gifts. The exclusion is the amount you can give to a single donee each year with no gift tax liability. (For 2014, the annual federal gift tax exclusion is $14,000.) However, the annual exclusion applies to gifts of "present interests." That term means the gift can be possessed, used, or enjoyed now, instead of sometime in the future. Contributions to trusts generally are not present interests. But granting beneficiaries a specified time period, such as 30 days, to make withdrawals allows your contributions to meet the present interest definition and qualify for the annual gift tax exclusion. Other documents you may need include copies of trust agreements, corporate balance sheets, and life insurance statements.
Please give us a call. We'll help you get the paperwork in order.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2014
