6 ms·

What about gifts? Can people gift other people things? If we forbid gifts, because they're an obvious transfer of wealth, what about financial transactions tha

by tasuki 6y ago

What about gifts? Can people gift other people things? If we forbid gifts, because they're an obvious transfer of wealth, what about financial transactions that favour one party? Should it be legal for a rich parent to sell their car to their offspring for below market value? How much below market value? As you can see, none of this makes any sense to me. I believe people would get around whatever restrictions you put in place rather easily.

thaumasiotes 6y ago
> If we forbid gifts, because they're an obvious transfer of wealth, what about financial transactions that favour one party? Should it be legal for a rich parent to sell their car to their offspring for below market value? How much below market value? In fact, this is already illegal, but there's no enforcement. (Enforcement would be challenging in any realistic scenario; it always is when every party to a transaction benefits from it.) According to the law, whenever you obtain anything from anyone (not just relatives) at a price below market value, you have to pay taxes on the difference.
- cgriswald 6y ago
  In fact, neither of those is illegal. You’d have to be fairly wealthy and incredibly generous to actually trigger conditions needed to pay taxes on gifts. Aside from being able to give $15K per person per year (or twice that for married couples) you also get a lifetime gift-giving exemption of nearly $12 million for any gift giving over the annual amounts. You’re also allowed to sell your kid your car for $1. It’ll probably be counted as a gift of market value - $1. Your kid will probably be required to pay taxes on it as if he purchased it for market value. But it’s not illegal.
  - thaumasiotes 6y ago
    > You’re also allowed to sell your kid your car for $1. It’ll probably be counted as a gift of market value - $1. Your kid will probably be required to pay taxes on it as if he purchased it for market value. But it’s not illegal. Sure. But when I say "this is already illegal", I'm implicitly including the kid not paying the taxes after this happens.
    - sokoloff 6y ago
      They don’t have to pay income taxes on it in the US; it’s a gift. They may have to pay excise or property tax on it at the fair market value, but that’s about registering the car for road use, not about gifted property being taxable to the recipient as you claimed.
      - starfallg 6y ago
        Gifts may be taxed in the UK if they were made up to 7 years before the death of a person. The tax would then be deduced from the estate.
    - cgriswald 6y ago
      Not pay taxes is always illegal, but as the sibling poster said, taxes aren't required for the gift. The state will still probably require the recipient to pay taxes to transfer the title as if you paid full market value. I say probably because it isn't always market value that's required and there is some discretion involved. The gift exemption is one way in which the wealthy already avoid existing estate taxes.
  - sokoloff 6y ago
    Note that a married couple can give their married children 4x the individual exemption annually. (A gives C and D $15K each. B gives C and D $15K each.) Nothing about this requires C and D to be married, of course, other than A and B’s willingness may be higher to give to a spouse than a boyfriend or girlfriend.
    - lotsofpulp 6y ago
      That’s just the annual amount that triggers the requirement to fill out a tax form. $60k is nowhere near where anyone would be taxed anything: https://smartasset.com/retirement/lifetime-gift-tax-exemption https://smartasset.com/retirement/lifetime-gift-tax-exemptio...
    - pkaye 6y ago
      Or you can give them up to the estate tax lifetime exemption limit which is currently $22.36 million. Most people have a net worth well below this so there is no tax consequences.
      - cgriswald 6y ago
        This thread is about efforts that might be taken to avoid a hypothetical 100% no-exemption estate tax.
didibus 6y ago
That's why I said: "Now how would that be managed in practice, no idea, and I haven't fully thought through everything here" It's clear that finding mechanisms to implement this would be the next steps, but also not worth thinking about if people refute the premise itself. That said, I'm not going to accept refuting the premise based on the fact that we don't know how to implement it, that's circular to me.
- sokoloff 6y ago
  Even before we get into practical concerns, I don’t believe that the state should (morally) have more claim to the residual of my estate than my family (or whomever else I choose to leave my items and money to). If you want to tax large estates (as we do currently), I’m ok with that, but taxing any portion at 100% and taxing estates substantially lower than the current exemption at all I find an unseemly (and for small estates, unwieldy) picking the pocket of someone who worked hard and saved/invested diligently to give their family a better life.
  - IG_Semmelweiss 6y ago
    This man speaks truth
- tasuki 6y ago
  Fair enough. My gut feeling says such mechanisms are impossible. If you do find any without obvious loopholes, many people will be quite excited. Keep us posted!
bserge 6y ago
They would, but there will be many who won't. Which is why I think it's a good idea.
- thatguy0900 6y ago
  The people who won't will be the poor people. As it always is. The people with money can afford to get the expertise to avoid it. And the politicians writing the laws will be in that group.

by tasuki 6y ago

thaumasiotes 6y ago

> If we forbid gifts, because they're an obvious transfer of wealth, what about financial transactions that favour one party? Should it be legal for a rich parent to sell their car to their offspring for below market value? How much below market value? In fact, this is already illegal, but there's no enforcement. (Enforcement would be challenging in any realistic scenario; it always is when every party to a transaction benefits from it.) According to the law, whenever you obtain anything from anyone (not just relatives) at a price below market value, you have to pay taxes on the difference.

cgriswald 6y ago
In fact, neither of those is illegal. You’d have to be fairly wealthy and incredibly generous to actually trigger conditions needed to pay taxes on gifts. Aside from being able to give $15K per person per year (or twice that for married couples) you also get a lifetime gift-giving exemption of nearly $12 million for any gift giving over the annual amounts. You’re also allowed to sell your kid your car for $1. It’ll probably be counted as a gift of market value - $1. Your kid will probably be required to pay taxes on it as if he purchased it for market value. But it’s not illegal.
- thaumasiotes 6y ago
  > You’re also allowed to sell your kid your car for $1. It’ll probably be counted as a gift of market value - $1. Your kid will probably be required to pay taxes on it as if he purchased it for market value. But it’s not illegal. Sure. But when I say "this is already illegal", I'm implicitly including the kid not paying the taxes after this happens.
  - sokoloff 6y ago
    They don’t have to pay income taxes on it in the US; it’s a gift. They may have to pay excise or property tax on it at the fair market value, but that’s about registering the car for road use, not about gifted property being taxable to the recipient as you claimed.
    - starfallg 6y ago
      Gifts may be taxed in the UK if they were made up to 7 years before the death of a person. The tax would then be deduced from the estate.
  - cgriswald 6y ago
    Not pay taxes is always illegal, but as the sibling poster said, taxes aren't required for the gift. The state will still probably require the recipient to pay taxes to transfer the title as if you paid full market value. I say probably because it isn't always market value that's required and there is some discretion involved. The gift exemption is one way in which the wealthy already avoid existing estate taxes.
- sokoloff 6y ago
  Note that a married couple can give their married children 4x the individual exemption annually. (A gives C and D $15K each. B gives C and D $15K each.) Nothing about this requires C and D to be married, of course, other than A and B’s willingness may be higher to give to a spouse than a boyfriend or girlfriend.
  - lotsofpulp 6y ago
    That’s just the annual amount that triggers the requirement to fill out a tax form. $60k is nowhere near where anyone would be taxed anything: https://smartasset.com/retirement/lifetime-gift-tax-exemption https://smartasset.com/retirement/lifetime-gift-tax-exemptio...
  - pkaye 6y ago
    Or you can give them up to the estate tax lifetime exemption limit which is currently $22.36 million. Most people have a net worth well below this so there is no tax consequences.
    - cgriswald 6y ago
      This thread is about efforts that might be taken to avoid a hypothetical 100% no-exemption estate tax.

didibus 6y ago

That's why I said: "Now how would that be managed in practice, no idea, and I haven't fully thought through everything here" It's clear that finding mechanisms to implement this would be the next steps, but also not worth thinking about if people refute the premise itself. That said, I'm not going to accept refuting the premise based on the fact that we don't know how to implement it, that's circular to me.

sokoloff 6y ago
Even before we get into practical concerns, I don’t believe that the state should (morally) have more claim to the residual of my estate than my family (or whomever else I choose to leave my items and money to). If you want to tax large estates (as we do currently), I’m ok with that, but taxing any portion at 100% and taxing estates substantially lower than the current exemption at all I find an unseemly (and for small estates, unwieldy) picking the pocket of someone who worked hard and saved/invested diligently to give their family a better life.
- IG_Semmelweiss 6y ago
  This man speaks truth
tasuki 6y ago
Fair enough. My gut feeling says such mechanisms are impossible. If you do find any without obvious loopholes, many people will be quite excited. Keep us posted!

bserge 6y ago

They would, but there will be many who won't. Which is why I think it's a good idea.

thatguy0900 6y ago
The people who won't will be the poor people. As it always is. The people with money can afford to get the expertise to avoid it. And the politicians writing the laws will be in that group.