[Anonymous]

To my understanding, when you give a gift, it is excludable up to 14,000. But I recently came across a Wiley question where you use the gift tax, which you calculate with the formula:

Basis + [gift tax (FMV-basis) / (FMW-14,000)]

I am just wondering, how do you know when to use this as opposed just determining if the gift is over 14,000 or not?

[CPA soon]

Not sure what your formula means, and no clue what FMW means but I just want to point out since you are taking the exam in Q2, you still use the 2012 limit of 13,000 not 14,000.

FAR - 71, 68, 74, (8/31/14) 78 ✔
REG - 67, 71, 71, (10/18/14) 78 ✔
BEC - (11/29/14) 86 ✔
AUD - 73, (4/4/15) 86 ✔

I can't believe this is over! 2 years and 3 months..

[CPA soon]

Not sure what your formula means, and no clue what FMW means but I just want to point out since you are taking the exam in Q2, you still use the 2012 limit of 13,000 not 14,000.

FAR - 71, 68, 74, (8/31/14) 78 ✔
REG - 67, 71, 71, (10/18/14) 78 ✔
BEC - (11/29/14) 86 ✔
AUD - 73, (4/4/15) 86 ✔

I can't believe this is over! 2 years and 3 months..

[Topsya]

if the question tells you that there was a tax paid by the donor, then use that formula

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[Topsya]

if the question tells you that there was a tax paid by the donor, then use that formula

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[MikeHoncho]

@CPA Soon

For those of us taking the exam in Q2, I think we are using the 2013 exclusion of $14,000. Then starting in Q3 the 2014 tax law material is tested.

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[MikeHoncho]

@CPA Soon

For those of us taking the exam in Q2, I think we are using the 2013 exclusion of $14,000. Then starting in Q3 the 2014 tax law material is tested.

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[Anonymous]

This formula is only for one circumstance… And I'm going to use you as the donor and me as the donee for the explanation..

If you gave me a car as a gift my basis would normally be whatever your basis was right? Well if you gave me a car and you had to pay gift tax on it since the basis was over 14k, then my basis in the car needs to be adjusted.

I would use that formula to determine what my basis should be in the car. The theory behind it is that since you are giving the car to me and I don't have to pay anything for it, I should at least have to pay higher taxes on it when I sell it down the road. By taking your basis of say 10k rather than using the FMV as my basis of say 20k I will pay higher taxes in the future because I will have a larger gain.

However, if you already paid some gift tax on it, I should be given a break and be able to raise my basis by a portion of the taxes that you paid, therefore reducing the taxes I pay in the future.

Hope that helps!

[Anonymous]

This formula is only for one circumstance… And I'm going to use you as the donor and me as the donee for the explanation..

If you gave me a car as a gift my basis would normally be whatever your basis was right? Well if you gave me a car and you had to pay gift tax on it since the basis was over 14k, then my basis in the car needs to be adjusted.

I would use that formula to determine what my basis should be in the car. The theory behind it is that since you are giving the car to me and I don't have to pay anything for it, I should at least have to pay higher taxes on it when I sell it down the road. By taking your basis of say 10k rather than using the FMV as my basis of say 20k I will pay higher taxes in the future because I will have a larger gain.

However, if you already paid some gift tax on it, I should be given a break and be able to raise my basis by a portion of the taxes that you paid, therefore reducing the taxes I pay in the future.

Hope that helps!

[Anonymous]

Now that I reread it a car is a terrible example 🙂 there's no way you would have a basis of 10k and have a higher FMV 🙂 cars sadly usually depreciate in value haha

[Anonymous]

Now that I reread it a car is a terrible example 🙂 there's no way you would have a basis of 10k and have a higher FMV 🙂 cars sadly usually depreciate in value haha

[CPA soon]

@Mikehoncho , well whatever you want to call it 2012 or 2013, I think the 14k limit kicks in in Q3. Could be wrong but when I took my exam I was going by 13K.

FAR - 71, 68, 74, (8/31/14) 78 ✔
REG - 67, 71, 71, (10/18/14) 78 ✔
BEC - (11/29/14) 86 ✔
AUD - 73, (4/4/15) 86 ✔

I can't believe this is over! 2 years and 3 months..

[CPA soon]

@Mikehoncho , well whatever you want to call it 2012 or 2013, I think the 14k limit kicks in in Q3. Could be wrong but when I took my exam I was going by 13K.

FAR - 71, 68, 74, (8/31/14) 78 ✔
REG - 67, 71, 71, (10/18/14) 78 ✔
BEC - (11/29/14) 86 ✔
AUD - 73, (4/4/15) 86 ✔

I can't believe this is over! 2 years and 3 months..

[Author]

Replies