It's not often that I get a question about gifting and gift tax. Marti, one of our students, asks the following question about a gift to her son:
Q: Hey, Tom, I'm appreciating the audio CDs This question is about gifts. Our adult son, a school teacher, wanted to have his own home. After a long story... he found building site, and a builder who would let him help with the job to save money (and increase pride). I sold the company stock I had accumulated over the years in my (former) job. This was 2009. The stock sale proceeds (after the "crash") just barely covered the land purchase at $78,000. These proceeds approximately doubled our (the parents of said son)taxable income in 2009, so I had to scramble to pay off the IRS. H&R Block prepared my return for 2009. I asked them if there weren't some law about being able to give your offspring around $12,ooo from each parent, per year, without tax consequences to someone (either the recipient or the gift-givers). They said "no", and I haven't been able to find anything about it in the 2010 IRS booklet used to guide return preparation. Currently, our return is almost finished being prepared by our usual person, who is an Enrolled Agent. He doesn't know anything about gifts and taxes, either. I know you can clarify this for me, Tom. and thanks so much.
A: I suspect your confusion stems from the difference between income tax and gift tax. You can give anyone (your son or anyone else) an annual gift of up to $13,000 without any gift tax. Gift tax is a tax on the transfer of property from one person to another. It does not directly affect your income tax. You should have filed a gift tax return (form 709) for 2009. You probably would not have incurred a gift tax, due to the lifetime exclusion of $1 million that was in effect in 2009.
I suggest you upgrade your tax advisors to a qualified CPA at least. H&R Block is fine for people who don't do investing or have a business. Same with an enrolled agent. However, for more complex situations, always use a CPA. If you would like more information about our CPAs and our tax advisory services, please contact us at 866.467.5809.
Warmest regards,
Tom