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Could they have offered to pay the tax? Or would that then trigger more tax, creating some kind of infinite loop of gifts and taxes?
by tayo42 4y ago
Could they have offered to pay the tax? Or would that then trigger more tax, creating some kind of infinite loop of gifts and taxes?
- Denvercoder9 4y agoOffering to pay the tax does trigger more tax; but as the added tax is less than what you add to the price, the total amount converges (as long as the tax rate is less than 100%). To have the recipient end up with a net payment N after taxes you've to pay N/(1-r), with r being the tax rate. With a 25% tax rate and car value of $28,500; to make it a tax-free gift Oprah should've paid an additional $9,500.
- stilldyl 4y agoYes. There’s a great YouTube view about exactly this by Stand Up Maths if you want to go down a rabbit hole. https://youtube.com/watch?v=3cNdM7W0VlQ https://youtube.com/watch?v=3cNdM7W0VlQ
- projektfu 4y agoYeah, the term is "grossing up" and it's often done for bonuses and things. I've also seen it on sweepstakes. One for Fage yogurt offered a dream vacation to Greece and included a gross-up to pay the income tax.