Besides the estate tax reason, gift tax also exists to make
it more costly to transfer income producing property to
household members in a lower tax bracket.

Regards,
Bill
~~~~~
William P. Brown, PhD, CPA
Associate Professor of Accounting
College of Business & Economics
Longwood University
http://www.longwood.edu/staff/wpbrown/

Opinions are mine, not necessarily my employer's.

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Dick Adams <rdadams[at]smart.net> wrote:
- quote -

I think that at least part of that was originally to avoid
double taxaction on the same increase in value. I haven't
checked it lately, but I believe that in 2010, the year in
which no estate tax at all will be charged, the stepped up
basis rule is modified so that at least some tax will be due
on capital gains of the decedent.

- quote -

Or (in community property states) even to file a gift tax
return. But make that closer to a quarter million.

You're right, though. As a practical matter little of any
gift tax is actually paid, and such gifts go to reduce the
estate tax exemption.

Stu

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Tyler Hall wrote:

- quote -

I don't think there is a Canadian gift tax, except on
gifts to non-residents. Then again, there isn't EXACTLY
a Canadian estate tax; all assets are deemed sold on the
date of death, and capital gains taxes are assessed.

As the US and Canadian gift and estate taxes have a
completely different structure, it seems unlikely that
they have the same origin.

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"Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> wrote:

- quote -

My recollection is that gift tax was enacted to prevent people from
avoiding estate tax by giving their property away during their lives.

Stu

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"Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> wrote:

- quote -

It exists because a government has the power to implement
it. It need not be (and often is not) logical or equitable.

Think of it this way: A tax is the legal taking of property
by those who have the power to do so, from those who do not
have the power to resist it.

In the types of political systems existing in Canada and the
U.S., that "power" is *sometimes* derived from and
represents the will of a majority of the electorate.

Most often it just represents what the politicians can get
away with in their never ending quest to buy votes and
pander to special interests.

--
To reply to me directly, remove the XXX characters from my
email address.

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"Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> writes:

- quote -

The gift tax exists because it is a necessary corollary
of the estate tax.

If you had an estate tax and no gift tax, people would
simply gift their assets on their deathbed, completely
avoiding the gift tax.

So I suppose your question should be "why does an
estate tax exist at all?", instead.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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"Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> wrote:

- quote -

It's to cut off what would otherwise be an easy way to avoid
estate taxes: give stuff away before you die. Thus, at least
in the US, the gift and estate taxes are linked:
over-the-limit gifts reduce the amount of your estate that
isn't taxed for estate taxes.

--
Chris Green

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Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> wrote:

- quote -

The U.S. gift tax exists mainly as a back-up to the federal
estate tax. (I.e., if there were no gift tax, it would be
easy to avoid the estate tax through lifetime gifts.)

**Dan Evans
**I post information, not advice.

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Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> wrote:

- quote -

The U.S. gift tax exists mainly as a back-up to the federal
estate tax. (I.e., if there were no gift tax, it would be
easy to avoid the estate tax through lifetime gifts.)

**Dan Evans
**I post information, not advice.

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Tyler Hall" <Tyler_HallNO[at]SPAMsympatico.ca> wrote:

- quote -

Without the gift tax, the estate tax would be meaningless
because it could be avoided by gifting the estate away.

The estate tax is the real problem. In an ideal world, an
estate should pay a capital gains tax on the difference
between FMV and basis. In an effort to engage in tax
simplication (click off the safety catch on your Uzi now),
it is FMV less exemption.

Even so how many people actually pay a gift tax since no
gift tax is owed until you exceed the exemption? A couple
with five married children can gift almost a half a million
dollars a year to their children without having it go
against their exemption. So go figure!

Dick

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I never understood why a gift tax exists at all, can someone
explain it to me? My thinking is this (and even though my
email addr is canadian I'm sure this applies to both
countries):

Say I purchase some item. I had to pay sales tax for that
item. If I keep it until I die, the government will never
receive more tax for it (not counting what happens after I
die). If I turn around and sell it for more than I paid for
it, I pay a capital gains tax on the profit. If I lost money
when I sold it, I can attribute the loss against some other
tax I have to pay.

Now, if I simply give it to someone else (and say it's worth
a million dollars) why should I or the receiver have to pay
tax on that? I will be without that million dollar value,
and I've already paid the tax on behalf of the receiver,
what did the government do to deserve a piece of the
transaction?

If I hand over this item in exchange for something, then I'd
say it's a business transaction and the government gets a
piece of the action for providing the opportunity to do
business, where both parties (seller/buyer) gain something
from the transaction. But a gift is not a business
transaction, someone gains and someone loses. If this
million dollar gift keeps getting passed around it will soon
only be worth $11,000 (or whatever the limit is)...again,
what did the government do that makes it elegible to collect
on the transfer of ownership of this item, especially since
there is no money (legal tender, a service/material provied
by the government) involved?

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