Q: What is the maximum amount of money a person can receive as a gift from a family member without claiming it as income? --Cynthia, Boston
The following answer was provided by Mark Misselbeck, CPA, Levine Katz Nannis & Solomon PC, Needham.
A: There is no limit to the amount that may be received as a gift and there will be no income at the time of the gift to the recipient. The receiver "steps into the shoes" of the person making the gift (the donor). Any income that the donor would have reported, had they sold the property, will be income to the recipient, when the income is reportable under normal income tax rules. The situation is more complicated when the value of the property is less than the donor's tax basis at the time of the gift.
A donor may gift any amount that they choose to any one. If the recipient has unfettered use and ownership of the property, directly, there is no tax on the first $ 11,000 of gifts made to any one person by the donor in any one year. Direct payments of medical expenses or tuition to the medical service provider or the school/college/university do not count against the $ 11,000 limit. No part of a gift whose use and ownership is not immediately available to the recipient may be "covered" by the $ 11,000. Beyond that, the donor is using up the lifetime limit of $ 1,000,000 that each person has available as exempt from taxes. Gifts exceeding the lifetime limit of $ 1,000,000 are subject to a tax on the transfer of the property that will start at 41%, which the donor is obligated to pay. Income may be "triggered" to the donor if there is debt on the property and the debt exceeds the donor's tax basis in the property.