You may even have to pay taxes for the donation. The person receiving your donation does not have to report the donation to the IRS or pay gift or income taxes on its value. No, but your mother may be asked to report this transaction to the IRS as a taxable gift. In general, the transfer of any property or interest in the property for less than adequate and total consideration is a gift.
One of the biggest feelings in the world is to give a gift to another person. But the donor (“donor”) must be aware that making a donation may result in tax reporting requirements. In certain situations, the IRS requires the donor to report a gift and file a gift tax return. The donor, not the recipient (“donee”), is generally responsible for any resulting gift taxes associated with the donation.
As a gift recipient, you're usually free. The person making the donation will file the gift tax return, if necessary, and will pay any taxes due. Parental support payments for a minor are not gifts if required as part of a legal obligation. If you sell property or family heirlooms to your child for fair market value, you don't have to file a gift tax return.
If you are making a donation to more than one person, the exclusion amount will be applied to each person individually. Not only do you not need to report them to the IRS to apply for gift tax, but any donations to a qualifying charity can be deducted from the total amount you donated. When considering donations, keep in mind that very different rules determine the tax base of the property that someone receives by gift compared to that received by inheritance. An important component of estate planning is making arrangements to pay any gift tax that the IRS may levy on cash or assets it transfers or bequeaths to others.
Form 4506 has multiple uses and special attention should be paid when completing the form for a gift tax inquiry. If you do not file a gift tax return, the IRS may question the valuation of the property at any time in the future. You cannot deduct the value of donations you make (except donations that are deductible charitable contributions). Regardless of whether the donor intended the transfer to be a gift or not, the tax will continue to apply as long as the transfer has been made.
Whenever an individual gives another person a property without receiving anything in return or something of much lower value, this is considered a donation and a gift tax will apply. In addition to the annual gift tax exclusion, donors must be aware of the basic exclusion amount. When a taxpayer decides to give a gift to another, they should be aware of possible reporting requirements.