Don't look a gift tax in the mouth
Reader wonders if he has to pay the government for 10G received from sister-in-law.
DEAR HARRY: My wife has a sister who is 93 and still in pretty good health. She is a widow worth more than half a million in apparently good investments. Last year, she gave six members of her family (including my wife) a check for $10,000. We did not report it on our income-tax return on the advice of the person who prepared it. We are not sure. She intends to do the same thing before Christmas this year. We sure do appreciate the money. Do we have to pay a gift tax on it? If so, what is the percentage? What form do we need? My wife heard somewhere that gifts are not taxable if they are not more than $10,000. Straighten this out for me, Harry.
WHAT HARRY SAYS: Our gift tax is counterintuitive. The tax is paid by the donor, not the donee. There is no tax on any gift that does not exceed $14,000 in 2013 ($13,000 for 2012) to any individual. Beyond that, there is an exemption of more than $5 million. Your wife's sister doesn't have that kind of money, so she is free from concern. Anyone with a total estate that exceeds $5 million should get expert legal advice on gifts and bequests. So enjoy your gifts, and don't worry about taxes. However, with longer life expectancies, be sure your sister-in-law leaves enough for herself.