Talk:Gift tax

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Contents 1 Article Needs Overhaul 2 Why is the Giftor Taxed? 3 Gift Tax as a Supplement to the Estate Tax

[edit] Article Needs Overhaul

This article is fundamentally not correct. A gift tax is not considered the taxation of a gift above a certain value as if it were earned income. This implies that the gift tax is levied against the person who receives the gift by adding the value of the gift into the gross income of the recipient. In the U.S., a a gift tax is assesed against the one giving the gift, not to the donee. The gift tax is a supplement to the estate tax, and therefore, it closes the loophole that an estate tax-only transfer taxation system invites (In fact, this was the situation in the U.S. after the estate tax as we know it was first enacted, and it was easily defeated by the non-testamentary transfers of property from the decedent's estate). For those who might be worried about getting hit by the tax, never fear: The gift tax exemption, which is alluded to in the article, requiries a gift over $11,000 (in 2005) before a tax will be assessed. - Timothy Swartz [Note: Above comments were posted by a user at IP address 24.166.217.80 on 23 December 2005.]

The annual gift exclusion is $12,000 per giftee in 2006. 26 U.S.C. § 2503(b)(2).

[edit] Why is the Giftor Taxed?

I want to know why is it that the one giving away the gift is the one who must be taxed? What gain or income is s/he making from giving away a gift? Wouldn't he be losing his wealth or net worth? Shouldn't the one receiving the gift be taxed for receiving the gain/income? Tell me if I'm forgetting or overlooking something! [ This comment made by a user at IP address 69.22.193.202 on 8 February 2006 at 21:40]

Dear user at IP address 69.22.193.202: You're absolutely right. The donor or giver is realizing no gain or income in making a gift. The philosophy behind the gift tax is completely different from the philosophy behind the income tax. The gift tax, like the estate tax, the payroll tax (the part imposed on employers), and the sales tax, actually burdens a person who is "parting" with money (or other property).

At least, in the case of the payroll tax, the employer has received something in return (the benefit of the personal services of the employee) and, in the case of the sales tax, the purchaser has obtained a product, etc.

I cannot answer the "why" of your question at this time, except to say that the philosophy behind estate taxes (inheritance taxes) and gift taxes is probably based in part on the desire for tax revenue to run the government and partly based on the idea that people who are giving away enough "stuff" to actually be liable for these taxes must be pretty well off or have enough resources to be able to afford to pay the taxes. That's not a very good answer, of course. Maybe we need to revisit the issue later. Yours, Famspear 15:41, 9 February 2006 (UTC)

[edit] Gift Tax as a Supplement to the Estate Tax

As stated above, the reason why the U.S. taxes the donor is because of the problems an Estate Tax-only system raises. In order to understand this, imagine an Estate Tax [I say imagine, though the U.S. had an Estate Tax-only system before 1920, I think it is] which only taxes the estate at the moment of death. What is the attorney for Bill Gates going to say to him, if, in fact, Bill Gates wants to make sure his wealth stays entirely within his family? Obviously, he or she would tell him to give everything away to those who he would have willed the property to had there not been an Estate Tax. Of course, Bill Gates isn't going to "give" everything away unless he is on his death bed, but a transfer into a trust, in which he is the trustee and beneficiary along with other beneficiaries who are members of his family (or whoever he would want the property transferred to), constitutes a gift in which he is no longer the legal owner of the property. Evern today, property in trust passes outside of probate, because legal title has been gifted to the trustee. Without a gift tax, the Estate Tax is easily defeated through this common though useful tool in Estate Planning, rendering the Estate Tax virtually useless. Let's face it: The government wants its money, and rich people want to keep it to themselves and their family. As long as there is a government, and there are lawyers, there will always be loopholes exploited, and loopholes closed. Which, of course, is why the Tax Code is so complicated. The Gift Tax was a way of closing the loophole that an Estate Tax only system created - Timothy Swartz

Correct. You've said all that I wanted to say. Nathanpatterson 23:21, 24 May 2006 (UTC)