Are gifts, bequests, or inheritances taxable?

Generally, property you RECEIVE as a gift, bequest, devise, or inheritance is NOT included in your income IRC §102(a). However, if property you receive this way later produces income such as interest, dividends, or rent, that income is taxable to you IRC §102(b).

If you inherit an Individual Retirement Arrangement (IRA) or proceeds from a pension plan, special rules apply to determine if any of the proceeds are subject to tax.

NOTE: For year 2006, if you are a U.S. person RECEIVING aggregate foreign gifts exceeding $12,760, you must file an information return with the IRS.

For year 2006, the annual gift tax exemption is $12,000. Therefore, the first $12,000 of gifts to any one person are NOT included in the total amount of taxable gifts.

You can give gifts to a spouse who is NOT a citizen of the United States up to $120,000 (other than gifts of future interests in property) and exclude them from the total amount of taxable gifts.

For year 2007 gift tax information, click here.

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