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Gift Tax Consequences

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One of your clients, David, has been trying to convince his
mother, Lorinda, to give him a tract of undeveloped land. Lorinda is
willing to make the gift, but she is uncertain about the tax
consequences involved. In any event, she wants David to pay any gift
tax that would result.

The land was purchased by Lorinda 30 years ago for $30,000 and
currently has a value of $200,000. Lorinda's only prior taxable gift
occurred in 2004 and involved an apartment building worth $1 million.
No gift tax resulted, due to the unified credit.

What are the tax consequences of a "net gift" of the land by his
mother?

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Solution Summary

The expert determines the gift tax consequences.

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ANSWERS

First, the unified credit availed in 2004 has effectively exhausted Lorinda's total credit that she can use to reduce her gift tax after 2004.

Second, a net gift is a gift ...

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