Legal Question in Wills and Trusts in California
Gift basis against lifetime exclusion: donee's (=donor's) or FMV
If I gift property w/ a basis/cost of 20K, the donee will receive my original basis as his: the property has increased in value dramatically, FMV now 270K. Assuming that I do not die within three years of the date of the gift, which amount goes against my lifetime exclusion: a. my original cost and the donee's basis, less 10K annual gift exclusion; b. FMV of property, less 10K, at date of gift; or, c: FMV at date of death (except that property is being given at 100%, so should no longer be part of the estate at date of death). What tax returns are filed by each the donor and the donee at date of gift?
2 Answers from Attorneys
Gift's FMV at time of transfer applied against unified credit
The gift receiver will take your basis, and the gift's fair market value at the time you give it will be applied against your unified credit amount (now $625,000) minus $10,000 for the annual exclusion.
Only the giver must file a gift tax return.
GIFT BASIS AGAINST LIFETIME EXCLUSION
The amount of the gift is the fair market value of the article, which is $270,000. This is reduced by the $10,000. annual exclsuion. Since the total amount if the net taxable gift is $260,000 the donor must file a gift tax return in by April 15 in the year following the gift. On the gift tax return the donor can either (1) pay the gift tax on the $260,000 gift (which will reduce the donor's taxable estate by the amount of the tax paid) or (2) claim the $260,000 as a credit agaisnt the donor's lifetime credit. (the amount of which will be determined in the year of the donor's death). In any event, the basis is the hands of the donee remains the donor's existing basis at the time of the gift.
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