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Gift vs. Support


Hahn1040

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My client contributed $20,000 each to her two son's 529 plans.  They are ages 12 and 17.  Dad is deceased.

I explained that we need to file a Gift Tax return and so i need the total of all  gifts made during the year.

I feel that it is a gray area of what is a gift vs. support for dependents.  Certainly, if you give your 26 year old son a car, it is a gift.  But when you give your 16 year old dependent a car is it support or a gift?

Does anyone have a source that addresses this issue?

Thank you for your help

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Yes, she has to file a gift tax return.  No consequence unless she's already gifted her $12M lifetime exemption.  She can spread the gift over five years, but no point in that since there won't be any tax.

I don't think a 16 year old can legally own a car, so it would be in your name anyway.

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18 hours ago, Hahn1040 said:

I feel that it is a gray area of what is a gift vs. support for dependents.  Certainly, if you give your 26 year old son a car, it is a gift.  But when you give your 16 year old dependent a car is it support or a gift?

For support for minors, there is an obligation to provide shelter and its related costs, food (whether at home or providing an allowance for meals outside of the home, clothing, health care costs, possibly some nominal allowance to meet those needs not provided at home. I'd include travel costs to school (but not for vacations/parties), so that part of operating the vehicle and its related costs could be included in support. I would also include cost of a laptop/computer and internet access in support at this point too. Clearly, if the parents purchase a car for a 26 year old titled in the child's name, that is a completely different scenario.

Gifts would be contributions to UTMA, 529, IRAs; larger amounts not for support; a car; other expensive gifts not required for their health/well being.

Also, this is an older article on the subject of dependency of college students but still worth the read: https://www.thetaxadviser.com/issues/2010/aug/nichols-aug-2010.html

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