The federal gift tax is a tax on the transfer of property from one individual (the donor) to another (the donee) when the donor receives nothing—or less than full value—in return. The tax applies whether the donor intends the transfer to be a gift or not.
The gift tax applies to the transfer of a gift of any type of property. You make a gift if you give property (including money) or the use of or income from property without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
For additional information, see Internal Revenue Service (IRS) Form 709 and its instructions.
The federal gift tax is applicable to all individuals in the United States, including those residing in California. It is imposed on the transfer of property by one person (the donor) to another (the donee) without adequate consideration in return. This tax is relevant regardless of the donor's intention for the transfer to be a gift. The tax encompasses all types of property transfers, whether it's money, real estate, or other forms of property. If a donor sells an item for less than its fair market value or extends a loan without interest or at a reduced interest rate, it may also be considered a gift for tax purposes. Each individual has an annual gift tax exclusion amount, which is adjusted periodically for inflation, and amounts gifted below this threshold do not require reporting and are not subject to the tax. Gifts exceeding this amount may require the filing of IRS Form 709, and potentially paying the gift tax, depending on the donor's use of the lifetime exemption. It's important to consult with an attorney or tax advisor for personalized advice, as state laws can affect certain aspects of gift planning and taxation.
