Christmas Day tax tip!

December 25th, 2013 by Joe Kristan

I know most people have better things to do today than read the Tax Update Blog (and the chorus says “and every other day!”), but I said there would be a tip every day for the rest of the year, so here goes.  Self-plagarization alert: It’s much like one I did in 2009.

IMG_2491In this season of frantic giving, don’t forget the $14,000 per-donor, per-donee gift tax exclusion. A couple with four kids maximizing annual giving can reduce their taxable estates by $560,000 over five years, not even counting appreciation of the gift.

If it’s worth doing, it’s worth doing right. To get the gift to count in 2013, here are some tips:

-If you’re writing a check, march the lucky recipient down to the bank to cash it by December 31. Checks not cashed by year-end normally won’t count as 2013 gifts.

- If you are donating private company stock, make sure the corporate secretary records the transfer on the company’s books by year-end. Also make sure the tax returns reflect the gift – if you make a December 25 gift of S corporation stock, make sure the donee gets a K-1 showing income for the 12/25 through 12/31 period.

- If you are donating public company stock, make sure it’s in the donee’s brokerage account before the end of the day December 31.

Personal gifts are neither deductible to the donor nor taxable to the recipient. For non-cash gifts, the recipient steps into the donors basis for a future sale if the property has appreciated.  If the value at the date of gift is less than the basis, the recipients basis for determining loss only is the date of gift value.

Plan on filing a gift tax return for any property gifts, even if you owe not gift tax; a properly prepared gift tax return starts the three-year statute of limitations, preventing any future IRS quibbling over the values.

Remember, if you miss the 2013 annual gifting exclusion, it’s gone forever. 2013 isn’t coming back.

Stop by tomorrow for another 2013 year-end tax tip!