Are gifts a taxable event?

[Seth Breidbart]

Sure, when you apply it to situations the code explicitly
states that no income is recognized (when you have an asset
and do not sell or otherwise transfer ownership).

What if, say, you sell a book for $5 because you don't know
it was worth $500? You "could have had" the $500, but you
didn't get it.

Or a consultant with a client who always pays promptly on
receipt of bill, who is on a cash basis, chooses to send his
bill for November's work on December 28, so he receives
payment on January 4. He could have sent the bill December
7 and received payment on December 14.

Seth

 

[Stuart A. Bronstein]

What if, say, you sell a book for $5 because you don't know
it was worth $500? You "could have had" the $500, but you
didn't get it.

Ok, there has to be an element of intent and knowledge.
Otherwise the IRS might try to tax you on stock that went up
after you sold it.

Or a consultant with a client who always pays promptly on
receipt of bill, who is on a cash basis, chooses to send his
bill for November's work on December 28, so he receives
payment on January 4. He could have sent the bill December
7 and received payment on December 14.

In that case, if caught, he could be forced to recognize the
income in the earlier year.

Stu

 

[Victor Roberts]

(e-mail address removed) (Seth Breidbart) wrote:

Ok, there has to be an element of intent and knowledge.
Otherwise the IRS might try to tax you on stock that went up
after you sold it.

In that case, if caught, he could be forced to recognize the
income in the earlier year.

There is no certainty that the client would have paid before
December 31 even if the bill for November had been submitted
in early December.

I have a client who paid each month's bill less than 30 days
after I mailed it in 2004, until I sent a larger than normal
bill on October 1. This bill was not paid until January
2005. In spite of the delay with this bill, the bill sent on
November 1 was paid before November 30 and the bill sent
December 1 was paid before December 31. Bills do get lost or
held up by clients for various reasons. The IRS has no right
to assume that the bill would have been paid in December
just because this client had a history of paying bills
promptly.

 

[Stuart A. Bronstein]

I have a client who paid each month's bill less than 30 days
after I mailed it in 2004, until I sent a larger than normal
bill on October 1. This bill was not paid until January
2005. In spite of the delay with this bill, the bill sent on
November 1 was paid before November 30 and the bill sent
December 1 was paid before December 31. Bills do get lost or
held up by clients for various reasons. The IRS has no right
to assume that the bill would have been paid in December
just because this client had a history of paying bills
promptly.

No. But if you colude with someone to pay you after the
first of the year, that would be considered to be improper
income shifting. Intentionally billing late for the purpose
of not being paid until the following year is not as strong
a case, but could cause a determination that the money
should be taxed in the earlier year.

Stu