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Tax and Ethical Consideration of Taxable Gifts

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Please explain tax and ethical considerations (with supporting authority where possible) regarding whether one should prepare a gift tax return that reports the taxable gifts in the following situation:

A client transferred his corporation stock to 14 donees in December 2007. Each donee received shares valued at $11,000. Two of the donees were my client's adult children. The remaining 12 donees were employees of the corporation and are not related to my client. My client, who is a widower, advised the employees that within two weeks of receiving the stock certificates they must endorse such certificates over to his two children. Six of the donees were instructed to endorse their certificates to one adult child and six to the other adult child. During 2007, my client also gave $35,000 cash to a grandchild. After meeting with my client, he insists that his 2007 taxable gifts will be only $24,000 ($35,000 to grandchild -$11,000 annual exclusion).

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Solution Summary

This response provides instructional advice for a case study based on the tax and ethical considerations on taxable gifts.

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Most estate-reduction tools involve some sort of gift giving. As you know, each person can give up to $10,000 to each of any number of recipients in each calendar year without having to report a taxable gift or use up the applicable exclusion amount.

Taxable gifts require no out-of-pocket ...

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