Question

Gift Joan, a married taxpayer, makes the following gifts during the current year (2018): $25,000 to her church, $110,000 to her daughter, and $50,000 to her husband. What is the amount of Joan’s taxable gifts for the current year (assuming that she does not elect to split the gifts with her spouse)?

Answer 1

Ans : As per Income Tax Act, gifts received by any person or persons are taxed in the hand of recipient under the head income from other sources at normal tax rate.

The court have outlined four requirements for gift to be considered non taxable to recipient.

• Can't be for a service performed

• must be spontaneous in nature

• can't be solicited

• can't be a tax deduction for the donor.

Joan gifted $ 25,000 to church. Gifts made to church are generally not taxable to the recipient. However, if the church takes up a collection during the service specifically to benefit the pastor or church employees, the gifts are taxable in the hands of recipient.

Gifts from specified relatives are exempt from tax as per sec 56(2) of the Income Tax Act. Any income received on the gift amount will be taxable in the hands of recipient of the gift.  

Gifts by Joan $1,10000 to her daughter and $ 50,000 to her husband are not taxable. Because, they are covered under specified relatives.