There are some interesting distinctions that must be made by the IRS regarding the nature of asset transfers, and their decisions can either save you a lot of money or cost you a lot of money. This is one of the reasons why it is wise to engage the services of an experienced estate planning attorney when you are planning your estate. He or she will have a very in-depth understanding of the tax code and advise you with regard to how to pass assets along to your loved ones in the most tax efficient manner possible.
An interesting case that underscores the delicate balance that exists between income and gifts for tax purposes would be the matter of the Derek Jeter baseball that has been in the news of late. Jeter, the longtime New York Yankees shortstop, has been aiming toward his 3,000th career base hit throughout the 2011 campaign. If he stayed healthy it was only a matter of time until he would achieve this milestone, and in fact he did get his 3,000th hit on Saturday July 9th, a third inning solo home run off David Price of the Tampa Bay Rays.
The ball was caught by a 23-year-old Yankee fan named Christian Lopez. Experts say that on the open market the ball would have been worth between a quarter of a million dollars and perhaps a million dollars, maybe more depending on how the market played out.
Lopez gave the ball to the Yankees instead of selling it. The Yankees showed their appreciation by giving Lopez some prime seats for the rest of the season and some autographed Yankee gear. The value of these things was estimated to be about $120,000. If the IRS sees this transfer as a gift, Lopez could use his lifetime gift tax exemption and accept the gifts with no tax liability. But if they interpret this exchange as being income rather than an act of pure generosity on the Yankees part his tax liability may be somewhere in the vicinity of $14,000 according to CNN.
Latest posts by Saul Kobrick (see all)
- 529 Plans: Planning for Education with a Tax and Asset Protection Bonus - September 10, 2019
- The Importance of Communicating Your Plans - September 5, 2019
- Planning for the Unexpected - September 3, 2019