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Wealth Management Question When the Estate tax is supposed…

Wealth Management QuestionWhen the Estate...
Wealth Management QuestionWhen the Estate tax is supposed to be paid in case If one buys his son a house as a gift while he is still alive?
Does the son need to pay the taxes immediately after his father dies or only if and when the son sell the house?
I assume for cash transfer Estate Tax got to be due immediately when the father dies but when the Estate tax is due for other assets such as jewelry, lands or even a small business?
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Answered in 1 hour by:
1/17/2018
RayAnswers
RayAnswers, Attorney
Category: Estate Law
Satisfied Customers: 48,947
Experience: Texas lawyer for 30 years in Estate law
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Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question, conduct and prepare your response.

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The estate pays any taxes due here as part of administration of the estate.If you gift property to another that you inherited it is due the year of the transfer.

The tax bill, passed by the House and Senate yesterday, temporarily doubles the exemption amount for estate, gift and generation-skipping taxes from the $5 million base, set in 2011, to a new $10 million base, good for tax years 2018 through 2025. The exemption is indexed for inflation, so it looks like an individual can shelter $11.2 million in assets from these taxes. Another federal estate law provision called portability lets couples who do proper planning double that exemption. So, a couple could exclude $22.4 million for 2018.

Unless you exceed these amounts no estate or gift taxes are due here.

I appreciate the chance to help you tonight.Thanks again.

If you can positive rate 5 stars it is much appreciated.

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Customer reply replied 7 months ago
Who is supposed to pay the estate tax, parent or the child if the parent is still alive?
I am aware of the Estate Tax deductible limit. But my question is different.I want to know specifically regarding type off asset given to children and when the Federal Estate tax is due. Are you saying if I give gift to my children while I am alive, cars, homes, art work etc. the year the total value of these gifts goes over $11.2 million the estate tax will be due the same year? Who will determine the value of the art work? What about expensive vacation as gift? Are those also taken into account for estate tax deductible limit of $11.2 million?
How would IRS keep track of all the vacation?
When a recipient inherit (or receive as gift) a multi million dollar home (over $11.2 million) does he have to pay the estate tax the same year? But he has not sold the house yet. He doesn't have the cash to pay the tax at that time. So, is IRS reserve the right to sell the house get the taxes from the proceeding? Or IRS will wait until asset converted into cash.
What about giving a business (no cash) as a gift?
Same question is for the art work.

You would be liable for the gift or estate tax.Each year you are filing an informational return , say you give them !00k one year, you report this so the IRS can calculate when the life limit is exceeded and tax is then due here.

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Form 709 is used to report transfers subject to the Federal gift and certain generation-skipping transfer (GST) taxes, and to figure the tax, if any, due on those transfers. Form 709 Instructions (PDF), This item contains helpful information to be used by the taxpayer in preparation of Form 709, U.S. Gift Tax Return.Sep 28, 2017

Forms and Publications Estate and Gift Tax | Internal Revenue Service

https://www.irs.gov/businesses/small...self.../forms-and-publications-estate-and-gift-tax

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Customer reply replied 7 months ago
The link you sent did not answer my questions. Let me repost the questions for someone else to take stab on it.

Here if you gift the property each year you file the form I gave you above for informational purposes, thats how they keep track of gift to that person.If you decease here the estate pays the estate taxes if the gifts exceed the amount here $10 million.

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Form 709 above is the informational form you file with IRS. If you exceed the $10 million lifetime limit then there is a gift tax and you pay it once you exceed the limits.If the estate exceeds $10 million or whatever limit is when you decease they pay taxes over that amount.

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Customer reply replied 7 months ago
How do they determine the $ value of a gift that is a) art work, b) small business?
Let's say none of these give is converted to cash, not sold.

You would want to have some kind of valuation/appraisal here.I mean if you are donating a Rembrandt as opposed to something of much lesser value.It is unlikely they would audit you here unless it is over the $10 million here.The IRS is looking for big items/big fish , audits are relatively rare.

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Customer reply replied 7 months ago
1. Is donation and gift to someone else the same thing?
2. Is the same rules apply when donating to a charity organization?
3. Who is responsible to do the appraisal of value of a small business?
4. When this appraisal need to be done, at the time of giving out the gift to children? or when the children if and when sell the business?

A gift to a charity is different because it is tax deductible, a gift to an individual is not here.You would be responsible for the appraisal costs so you can claim the proper deduction.It would allow you to have proper value and then children have beginning basis so that when they sell it any gains can be calculated here.

Thanks for the followup and for rating 5 stars.

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Customer reply replied 7 months ago
Thank you.
Good job. I gave you 5 start review.

Thanks so much.Stars at top of page.

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