I recently saw one of the “Oprah” episodes where she gave away mountains of stuff. I am always shocked at the reaction. She could say she is giving away a gold-plated paper clip, and people in the audience would lose it. I mean, people were screaming, crying, hugging each other, jumping up and down. Really? The only thing that would garner that type of reaction from me would be if she brought out George Clooney, in an electric blue Bugatti Veyron. He hands me the keys and says, “Let’s go for a ride.” Oh, yeah.
As I continued to watch the show, I realized that I have been working at Parsec way, way too long. She brought out expensive gift after expensive gift. Two thoughts popped into my head: “Geez, the taxes on this stuff will be terrible” and “I wonder if you could say no to some of this junk and yes to the other stuff, to reduce the tax liability.” I doubt anyone in the audience thought the same thing. They were too excited about rhinestone-studded mop handles.
Just out of curiosity, I asked one of our advisors about the tax consequences. Unfortunately, the answer is more complicated than I anticipated. It all depends upon each person’s individual situation and state of residence. How you receive the gift also comes into play. Oprah’s gold-plated paper clip might be considered contest winnings, so you might have to pay tax. However, if Uncle Joe gives you a wad of cash, he might incur a tax liability, again, based upon certain factors. So, if Clooney does appear in my driveway on Christmas Day in that lovely sports car, I should consult with a tax professional. (I wonder what the tax appraisal for Clooney himself will be?)
Should Santa be extra generous to you this year, keep the gift tax in the back of your mind. Do not get all excited about the gift and forget that the tax man always cometh for someone, either Santa or you!
I hope you and your family survives the madness of the holidays and has a healthy, happy new year.
Cristy Freeman, AAMS
Senior Operations Associate