How is the value of in-kind gifts calculated for gift tax purposes?
January 11, 2023 | 50,00 EUR | answered by Eiko Hoffmann
Dear tax consultant,
I hope you can help me with my problem. My name is Robert Mattes and I recently transferred a property to my son as a gift. Now I am wondering how the value of non-cash gifts is calculated for gift tax.
The property has a market value of 500,000 euros, but I transferred it to my son at a lower value. I have read that the value of the transferred item is crucial in the calculation of gift tax. Is that really the case and how is the value of non-cash gifts determined?
I am concerned that I may have to pay too much gift tax because I undervalued the property. Are there ways to legally reduce the value of non-cash gifts to save on gift tax?
I would be very grateful if you could explain to me specifically how the value of non-cash gifts is calculated for gift tax and if there are ways to optimize this value legally. Thank you in advance for your assistance.
Sincerely,
Robert Mattes
Dear Mr. Mattes,
Thank you for your inquiry regarding the calculation of the value of non-cash gifts for gift tax purposes. I understand your concerns and would like to help you by explaining in detail how the value of non-cash gifts is calculated for gift tax purposes and whether there are ways to optimize this value legally.
First of all, it is indeed the case that the value of the transferred item is crucial in the calculation of gift tax. In your case, with the transfer of a property, the fair market value of the property is taken as the basis. This means that the actual value of the property at the time of the gift is crucial, regardless of the lower value at which you transferred the property.
Tax authorities usually examine the fair market value of the transferred property and may conduct a revaluation if necessary to ensure that the gift tax is calculated correctly. It is therefore important to realistically state the value of the gift to avoid possible issues with the tax authorities.
If you have actually undervalued the property and are concerned about having to pay too much gift tax, there is no legal way to retroactively reduce the value. It is important to realistically state the fair market value of the gift and, if necessary, obtain a professional real estate appraisal to determine the exact value.
However, there are legal ways to optimize the value of non-cash gifts for gift tax purposes. One option is to use tax-free allowances that apply to gifts to children or spouses. These allowances can help reduce the gift tax burden.
It is advisable to seek advice from a professional tax advisor in your specific case to ensure that you are utilizing all tax opportunities to optimize the gift tax. A tax expert can provide individual advice and help you find the best solution for your tax situation.
I hope that my explanations have been helpful to you and I am happy to answer any further questions you may have. Thank you for your trust and your inquiry.
Best regards,
Eiko Hoffmann
