Question

1.  Having made no prior taxable gifts during the current year, D transferred title to her car to her 16 year old son, saying, “[t]his is for you. Now, I won’t have to drive you everywhere.” The car had a value of $21,000 at the time of the transfer. D asks you whether she should file a federal gift tax return reporting the transaction. (Assume that D is not married.)

a.  What would you advise her?

b.  What would be the result if D sold the car to her son for $12,000?

c.  What would be the result if D sold the car to her son in return for her son’s agreement to pay $12,000 to his sister (D’s daughter), a 21 year old college student whose tuition D otherwise was paying?

Answer 1

As per Laws , Gift tax return is basically a return which is filed by the individuals who give gifts to other individuals of amount that is more than the exempt value , here exempt value is $15000 and if anyone gives gifts that is over and above $15000 are needed to file that return

a. I would advise her to file Gift tax return because gift value increases $15000

b. If D Sold out the car to her son at $12000 , she would not be required to file the return because the value of gift is less than the exempt value

c. This also would be counted as gift only because minoe cannot make agreements on their own , Agreements made by them are Void ab initio i.e void from the beginning and D requires to file Federal gift tax return in this case