Taxation Homework Help Examples: Grace GIFT Tax Analysis

Case Analysis


The case is regarding whether the 51% share given by Grace to her family members should be termed as Gift or not. Before analyzing case let’s first understand the term Gift in terminology of IRS.

What is GIFT Tax?


The giving of gift, either financial or property based, from one individual to other is termed as “gift tax”. As per our taxation homework help experts it implies the taxation imposed by IRS on gifts. The type of transactions between two individuals in which one sells an item or property to another person at a rate less than the assessed value of that item or property then such transactions are also liable to the same taxation.

Gift Tax Law- Florida State


In Florida gift tax is applied but importantly it is to be noted that generally this gift tax law is not specific to a particular state- the institute which sets the gift tax rules, that is IRS, is federal or central and these rules are applied in the entire US which includes Florida also. In Florida State, these gift and death taxes are not imposed on most of the gifts of value. Also there are no separate laws of state to be imposed on gift.

Whenever there is some property transfer the tax that the parties are liable to pay is equal to or is less than that amount which is imposed by the central government as per the analysis done by our experts from taxation assignment help from Florida states. In most of the states and in Florida, it is known as “pick-up tax”. Florida State has a pick-up system according to which the estate tax is not considered due unless or until the estate under consideration is not required by any law to file any kind of federal tax return. The information on this subject is contained in detail in IRS document which was referred to earlier, Publication 950. Hence, Grace will not be liable under any Tax as per Florida state but we will have to consider the US IRS law also pertaining to Gift tax.

Gift Tax- Analysis as per IRS terms


According to the United States Internal Revenue Service, a gift is defined as “Any direct or indirect transfer from one individual to other in which full consideration, which can be either of money or money’s worth, is not received in return.  A taxable gift can be made in the form of cash, stocks, real estate, or any physical or intangible property as per our US taxation assignment help service department.. In all these cases the tax is usually imposed on the donor, that is the one giving the gift, unless the interest is retained because of which the completion of gift is delayed. Hence as per IRS, Grace should be liable for Gift tax. Let’s further analyze the nature of transfer:-

There are two cases of transfer of gift. First case is when the donor, giving the gift, receives nothing in exchange for the given property, then such a case of transfer is known as “completely gratuitous”. Else the other case is when the donor receives some value back in return for the exchange but the value of the property received by the donor in return is substantially less than the value of the property given by the donor. Such a transfer is known as “gratuitous in part”. In the latter case, the difference is the amount of gift involved in the transfer. Chapter 12, Subtitle B of the Internal Revenue Code governs the gift tax in United States. Section 2501 of the code deals with the tax imposed. Hence, in this case the gift comes under first category.

Courts have defined gift in a different manner for the purpose of taxable income which is like this “gifts are the proceeds from a detached and disinterested generosity”. Gifts are given often for many reasons. It can be out of praise, admiration, affection, respect, charity or like impulses. In this case also it is given as act of gratitude. However,in general case, gifts are those gifts in which the interest in the property involved is transferred during the lifetime of the giver itself. Such a gift or transfers are not subjected to estate tax.

Congress modified the gift and estate taxes in 1976. This modification limited the ability of the giver to escape from the estate tax by giving the gift during his or her lifetime. Inspite of all this, there are still differences retained between estate and gift taxes. These differences include effective tax rate, the credit amount available against the tax and the basis of received property. However, none of them are applicable in this case.

In general following types of gifts are not subjected to taxes:

  • Those gifts whose monetary value does not exceed the annual exclusion of the calendar year. For the year 2015 this exclusion was $14000 per recipient for any one donor.
  • Gifts that are given to different political organization for their certain applications.
  • Gifts that are given for charity.
  • Gifts given to their spouse provided the donor be a US citizen.
  • All kinds of Tuition or Medical expenses paid directly to a medical or educational institution for someone, provided the donor has to pay the expenses directly. But the same payment is made through a check written by the donor to the donee and then donee pays the expense then such a gift may be subjected to tax.



In this case the grace allocation of 51% doesn’t come under any of the eligible exemption. Hence, she is liable for Gift Tax. However she can avoid the tax if:-

  1. First those gifts whose value is up to the annual exclusion, which was $14,000 per recipient in 2015, are free from taxes and also have no filing requirement. For using this married couples can split the gifts into two thus they can resist tax paying for twice this value of annual exclusion. It is to be noted that each pair of giver and receiver have their own unique value of annual exclusion; the giver can give gifts to numerous number of receivers. Also the exclusion is independent of the other gifts that the recipient may have received from other donors.
  2. Second are those type of gifts that fall under the category of value more than the annual exclusion. These type of gifts can also be tax free if their value is up to the lifetime estate basic exclusion amount, which was $5,340,000 in 2014 and $5,430,000 in 2015. The gifts can also be over this amount which can increase the estate taxes. Sometimes the taxpayers expecting to have a taxable estate, instead of saving the taxes as part of estate, rather prefer to pay the gift taxes as they occur.


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