Section 102 A: Everything You Need to Know
Section 102 A is part of the Internal Revenue Code regarding federal income tax on inheritances and gifts.2 min read
2. Death Taxes
3. Estate Exclusion Laws
4. Gift Taxes
5. Gifts Are Taxed if Sold
Section 102 A is part of the Internal Revenue Code regarding federal income tax on inheritances and gifts. Section 102 A states that the value of things that are gifted or inherited is not part of one's gross income. Gifts that are exchanged are typically treated as neutral under the IRS code, so neither the party giving the gift nor the party receiving it pays taxes on gifted items. The way gifts and inheritances are treated by the IRS is an exception under the Internal Revenue Code.
A number of things are typically taxed as income by the Internal Revenue Service or IRS. These taxed items include:
- Earned income
- Profits from investments
- Retirement benefits
- Any other valuable item
Estate taxes are also called death taxes, and the Internal Revenue code puts the responsibility to pay these taxes on the estates rather than the beneficiaries. That means the estate has the responsibility to cover the cost of the deceased person's income tax that results from both personal property and real property. The administrators of the estate or the executors are required to file the deceased person's tax forms on behalf of the estate.
Estate Exclusion Laws
Property owned by the deceased person at the time of death is included in the estate. There are, however, estate exclusion laws that let a certain amount be excluded for property transfers. Estates valued at less than $5 million weren't liable to pay income taxes as of 2011.
The maximum amount that can be gifted per year without making it necessary for the recipient to pay taxes is $13,000 as of 2011. The person giving the gift, however, isn't the one who has to pay the taxes. Plus, if the gift is $13,000 or less, neither party has to pay tax on it.
There is another exception in the Internal Revenue Code for gifts over $13,000 per tax year. An unlimited amount can be given to pay educational and medical costs. These fees may, however, have to be paid directly to the school or medical facility rather than the recipient.
Gifts Are Taxed if Sold
While Section 103 A lets taxpayers omit the gift's value and inheritances when filing income tax returns, federal income taxes are imposed if the gifts are sold. The IRS permits some donees to raise the taxable property basis that's assigned to gifts in a few circumstances. Note that tax laws frequently change, so it's always a good idea to engage an attorney to guide you through these IRS codes. The IRS website also posts information about the latest changes to tax regulations and the procedures for filing your taxes.
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