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Gift Tax

Description

According to economics, a gift tax is a graduated tax, taxed to a donor by the federal and most state governments; property is gifted from one citizen to another. It is simply a tax on the right to hand down property in the form of gifts. Note that the gift giver is the one paying the tax and not the recipient, unless there is retention of specific interest which delays the completion of the gifting.

Gift tax is imposed in light to the fact that for a gift to be more effective, the grantor ought to have intended to gift the receiver, and the grantee on the other hand must demonstrate some willingness to receive the gift. This is according to the law of property and is applicable in almost all states and federal government. Of equal importance note is that the tax rate appreciates as the value of the gift increases.

Remember, the transfer is supposed to be totally gratuitous whereby the gift giver receives nothing of value in exchange of the gift in question. However, in some cases, the transfer of the gift can be gratuitous in part, whereby the grantor gets back some value but the value of the property received by the grantor is significantly less than that of the property given by the same, thus, making the gift amount the difference.

Gift Intent

The gift donor must have an intention of making a gift of the property to the recipient. A mere promise of making a gift in future is insignificant according to the law, even if the grantor accompanies his promise by a physical transfer of the property. This is because human beings are prone to changing their minds and they may demand back their gift in the future, so when gift tax comes into play, the grantor has already made a gift, and would be legally incapable of reclaiming it.

Gift Delivery

It is a requirement that the gift be delivered by the grantor to the grantee, even if it means symbolic delivery. If the gift in question cannot be delivered the traditional way, a gift such as a bank account or a house, thus the delivery process of the gift can be subject to constructive delivery. This is to say that a tangible item that gives access to the gift is delivered instead. A tangible item in case of the bank account is a passbook, and for the house it may be a key or a title deed. Symbolic delivery comes to play where manual gift delivery is unworkable; for instance a key not necessarily supposed to open anything can be delivered with the aim of symbolizing the ownership transfer.

Gift Acceptance

The gift recipient must accept the gift. Conversely, people rarely reject gifts, thus the acceptance of the gift by the recipient will be assumed, as long as there is no outright rejection. Once rejected, the recipient cannot restore the gift back by accepting it at a later date. Therefore, the gift giver will be forced to extend the offer again for the recipient’s wish of reviving the gift once rejected be acceptable and effective in law.

Conclusion

There are various tax exempted gifts such as gifts to charities, to spouses, tuition fee or medical expenses paid directly to an educational or medical institution, gifts to political groups and generally all gifts that do not exceed the annual exclusion for that year.

By and large, the aim of gift tax is to promote generosity amongst parties and to assist in wealth distribution. Gifting has a limit too such that one cannot gift an interest of a loss. This is commonly known as inability to gift a loss.

Tags: bank, Economics, government, law, Legal, tax

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