Tax Guru-Ker$tetter Letter

Saturday, September 24, 2005

Definition of Gifts

From a financial planner:

Subject: Gifts
Don't mean to be pickey but gifts do reduce the taxble income as in gifts to charity. Hope all is well.

My Reply:

I think there is some confusion over terminology.

While some lay-people may use the term "charitable gifts," we tax pros don't. There are charitable "donations" and "contributions," which do reduce taxable income via Schedule A for those people who itemize their deductions.

There are also charitable "bequests" that reduce the taxable estate on Form 706.

However, we reserve the terms "gifts" and "gifting" to only designate transfers of assets between individuals. These are part of the estate tax system and do not have any effect on the taxable income of the donor or recipient. I have more info on this on my main website.

I hope this clears up your confusion here.

Thanks for writing.

Kerry Kerstetter

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 9/24/2005 11:03:00 AM Send this post: