Is there a tax on money received from my father?

Answer 1

There will be an age at which it can be nothing other than a gift, so no tax would be applicable. However, if you're over 18 and it represents more than pocket money then you should technically declare it as income and pay tax accordingly. Then of course there's inheritance tax.

Anyone is allowed to gift up to $12,000 per person per year without the need for it to be declared as income.

Presuming it is a true gift, without a business purpose, etc.: Not taxable to you. However, he may have to pay a gift tax.

As it is done while he is living, there is no inheritance tax considerations, other than basic inheritance tax planning is to have the party gift amounts sufficent to reduce the potential estate below the estate tax threshold (1 mill), while alive, to avoide any estate/inheritance tax.

Gifts are not included in the recipient's income. An excludable gift is a voluntary transfer of property from one person to another, without any consideration or compensation, that proceeds from a detached and disinterested generosity, out of affection, respect, admiration, charity or like impulses. Although a gift for tax purposes may differ from a common-law gift,in most situations the requirements are the same. The common law requirements for a gift include the following:

l a competent donor;

l a donee capable of accepting the gift;

l a clear intention of the donor to divest title to and dominion and control of the property absolutely and irrevocably;

l donative intent, as opposed to business or investment motives;

l an actual irrevocable transfer of the legal title to and dominion and control of the property to the donee

l delivery of the property to the donee; and

l acceptance by the donee.

The gift tax applies to the transfer of property by gift, whether the gift is direct or indirect, and whether the transfer is in trust or otherwise. The property transferred may be real, personal, tangible, or intangible. The donor makes a gift to the extent that the value of the property transferred exceeds the consideration (that is, any property or services received in return for the transfer

The first $12,000 of gifts (to remain the same for 2007) of a present interest made by a donor during the 2006 calendar year to each donee are not included in the total amount of the donor's taxable gifts during that year ( Code Sec. 2503(b)). Therefore, these amounts are neither taxed nor do they use up any of the donor's lifetime gift tax applicable credit amount. Also, spouses who consent to split their gifts may transfer a total of $24,000 per donee in 2006 (to remain the same for 2007) free of gift and generation-skipping transfer tax ( Code Sec. 2513(a)).