Who pays the gift tax?

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I just read the Estate Planning chapter and it mentions sometimes gift receivers pay the tax and sometimes gift givers pay. But the book does not mention when gift receiver or giver. Searched online and some articles only mention in US a gift over $14,000, givers need to pay tax. Can I assume most of time gift givers will pay the tax when they give the gift in U.S.? When do the receivers pay the tax? I guess in different countries have different rules. Any thoughts will be helpful!
Thank you!
 
there is no general rule. You need to look at the particular question at hand to see who pays the gift tax.
and know to differentiate between the two -
if Donor pays the gift tax - estate transferred is lower by the amount of the gift tax.
If the donee pays the gift tax - (s)he would receive a higher estate amount, and pay the tax immediately on receipt of the estate. This might be a good thing to do if the donee has a lower tax rate than the donor.
 
Hi CPK123,
Thanks for the reply and information!
It totally makes sense to me that giver pay the tax when they give the gift. However, why would a receiver pays the tax seomtimes? What kind of situation would that be? I just cannot think of a situation in that scenario.
Thank you!
 
receiver has a lower tax rate… I already specified that above. (It is also present and written in the book (if not in bold)… I am not making this up at all).
Donor gives $1000 to receiver. If Donor’s tax rate is 40% while receiver’s tax rate is 20%… If Donor pays tax - Receiver will receive $600. But if the Receiver paid the tax instead - he would receive the entire $1000 and pay 20% tax - still left with $800 in the transfer.
 
In the US, the person giving the gift commonly pays the gift tax.
In other countries, who knows?
Go with the information they give you in the question.
 
Thanks for the reply! I think I understand a lot better with this concept now with all your responses.
One more question if you don’t mind. Do you know if the receivers can always choose to pay the tax if his/her tax rate is lower?
 
Read section
“4.1.3 Location of the Gift Tax Liability”
in the book.
1st statement:
“The preceding discussion implicitly assumes that the tax liability associated with the lifetime gratuitous transfer in the numerator of Equation 6 is borne by the recipient. Examples of jurisdictions that impose gift tax on the recipient include Colombia, Cyprus, Czech Republic, France, Germany, Italy, Japan, Netherlands, Russia, and Spain.”
“Other jurisdictions, such as Brazil, South Africa, and Switzerland, impose the tax liability on the donor. The distinction can be important for several reasons. First, a cross-border gift could result in both the donor and the recipient being taxed in their respective home countries. Second, if the tax liability is imposed on the donor’s taxable estate rather than on the recipient, the tax benefit of the lifetime gift versus the bequest increases.”
“Gifting therefore becomes more attractive from a tax perspective when the gift tax is paid by the donor.”
 
Great to know! Thanks a lot! Didnt see these in the Kaplan notes. I will read the book for some chapters now. Thanks again!
 
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