The person receiving your gift doesn't have to report it to the IRS or pay income tax or gift on its value. You make a donation when you give away a property, including money, or the use or income of the property, without expecting to receive something of equal value in return. The assets you receive as a gift or inheritance are generally not federally taxable income. However, if assets generate income later on (maybe they generate interest or dividends, or you collect rents), that income is likely to be taxable.
IRS Publication 525 has the details. In addition, some states have inheritance taxes. Form 4506 has multiple uses and special attention should be paid to filling out the form for a gift tax inquiry. Form 4506-T has multiple uses and special attention should be paid when completing the form for a gift tax inquiry.
For more information, see Internal Revenue Service Publication 950, Introduction to Inheritance and Gift Taxes. People who receive gifts of money or anything else of value do not need to report donations on their tax returns. The IRS requires you to file Form 709 if you make a large donation that exceeds the annual exclusion amount during the tax year. In addition to these gifts that aren't taxable, there are some transactions that aren't considered gifts and are therefore definitely not taxable gifts.
Do the above and you'll need to fill out a gift tax form when you file your returns, but you may still avoid having to pay any gift taxes. Gift givers may need to report any gift to a single person who, when combined, exceeds the annual exclusion. Even if you've donated an amount that exceeds the year limit, that doesn't necessarily mean you owe gift taxes. However, for those who have given or received large gifts this year, you may be wondering if there could be tax consequences.
This method should be reserved for taxpayers who have no record of what tax year (s) a gift tax return was filed. If you pay tuition or medical bills, paying directly to the school or hospital can help avoid the gift tax return requirement (see IRS Form 709 instructions for more information). If you're lucky and generous enough to exhaust your exclusions, you may have to pay gift tax. In most cases, it is recommended that you seek the advice of a Virginia tax lawyer or certified public accountant when giving away business interests.
The IRS considers a gift to be money or items of value given to another person without receiving anything of value in return.