Year ends are very busy for every business and societies. Not only is the management engrossed in preparing reports of the year’s profitability and transactions, but also the toughest job is of filing tax returns and making sure you don’t skip anything which can be a trouble for you later. One common notion prevailing is that there is no tax filing against trust transfers and gift items. Although the charitable and unilateral transactions are majorly exempted from taxation, but there are many conditions when tax is expected to be paid on gifts as well.
What is a gift?
First thing is to understand what exactly gifts are. A gift is any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return. This way, charities and donations to trusts also are a form of gift. A gift tax is a tax imposed on the transfer of ownership of such property or gift.
Taxable or Non-Taxable?
Generally, the following gifts are not taxable:
- Gifts which are not more than the annual exclusion for the calendar year.
- Gifts to a political organization for its use
- Gifts to charities
- Gifts to one’s (US Citizen) spouse
- Tuition or medical expenses paid directly to a medical or educational institution for someone by the donor him/herself.
Gifts which are taxable are:
- Gifts received at promotional events and private occasions.
- Gifts received from employers that benefit employees.
There are many more clauses regarding tax returns on trust and gifts. Tangible and non-tangible gifts are treated separately. Also if a gift fetches the donor something monetary in return, it is taxable but up to a certain extent. There is always a chance of a small error which can be termed as breach and cause you troubles. It is better to avail services of tax consultant firms which help in minimizing the risk exposure to your fiduciary obligations of complying with the Federal or State tax laws regarding trust and gift tax returns.