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Gift

Property, money or assets that one person transfers to another while receiving nothing or less than fair market value in return. Under certain circumstances, the IRS collects a tax on gifts. As shown by the following summary, the IRS treats an inheritance more favorably than a gift.

  • Gift
    • Recipient’s Cost Basis: Donor’s original cost basis
    • Holding Period: Donor’s purchase date
  • Inheritance
    • Recipient’s Cost Basis: Fair Market Value (known as “stepped-up basis” or “step-up in basis”)
    • Holding Period: Always long-term

Gifts are generally not taxable under the following circumstances:

  • The annual exclusion for 2014 and 2015 is $14,000. (read more)
  • Charitable donation
  • Paying tuition or medical expenses directly to the provider

References

Investopedia – DEFINITION OF ‘GIFT’
Wikipedia
TheFreeDictionary

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