UPDATED: 2019 for Tax Year 2018
If you receive a GIFT do you owe tax?
Gifted and Inherited Property in and of itself usually does not carry any income tax liability for the beneficairy (recipient) with the exceptions noted. In general, any assets, including cash, stocks, or the like, which you receive as an "Inheritance" [meaning from the Estate of a deceased person] or as a Gift are not in and of themselves taxable in the Federal or State Income Tax system because the assets are not received as "Income." However, any income generated by the inherited asset is taxable, appropriate to the type of income - see below
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GIFTS:
- The recipient of a Gift has no Income Tax Liability for the value of the Gift.
- The Donor may have to review the rules regarding Gifts, if any one Gift from one person
to one other person is greater than $15,000 in one year (as of 2018 Tax Year).
This is not income tax and
is the responsiblity of the Donor not the recipient. viz., IRS Form 709
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If the Gifted asset does produce income after you inherit the asset, then that income, depending on the circumstances and type of investment which the asset represents, will be taxable. Examples:
- You receive a bank account or bonds which produce interest income
- You receive stocks which produce dividend income.
- You receive stocks or other investments which you subsequently sell, and as a result produce either a capital gain or a capital loss - both of which are reported for tax purposes.
- You receive a house - which is not your personal residence and so is treated as an investment asset.
If you receive any form of investment property, that Gifted investment property if it produces any form of income in the form of interest or dividends, then the paid-out income is taxable and is reported on a Form 1099-DIV or 1099-INT, addressed to the recipient (presumably you!)
If you sell Gifted property, then you will pay a tax on capital gains with the Cost Basis based on the original cost of the property when the Donor first acquired or purchased the property, or report a capital loss. The Holding Period [term of ownership, resulting in either Short-Term or Long-Term ] will be the sum of how long you have held the asset plus how long the Donor held the asset [meaning you "tack on" that earlier holding period]
If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67
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USAR 64-67 AIS/ASA MOS 9301 - O3
- Just donating my time
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