What determines the liability of Gift Taxes?

The determination of liability for gift taxes revolves around the concept that the donor, or the person giving the gift, is the one responsible for reporting and paying any applicable gift taxes. The IRS establishes that the donor must file a gift tax return if the value of the gift exceeds a certain threshold, which is assessed on an annual basis. In this scenario, it is the act of transferring property or assets from the donor to the recipient that triggers the potential tax liability.

In contrast, the recipient, the total value of the estate, and the donor's contributions to their retirement fund do not directly influence the liability for gift taxes. While the recipient benefits from receiving the gift, they are not liable for any gift tax; this remains the responsibility of the donor. The estate's total value pertains more to estate taxes than gift taxes. Similarly, contributions to a retirement fund have no relation to the criteria set for gift tax liabilities. Thus, focusing on the donor who makes the gift establishes the basis for understanding gift tax obligations.