Question

Your daughter is getting married and, to celebrate, you give her fiancé a beautiful watch that you purchased for 5,575. What are the tax consequences of this gift?

1) Because they are not yet married, the fiancé is not actually a family member, so a gift tax would be levied.
2) No tax
3) Anything over the FINRA gift limit of 100 per person per year would be considered taxable.
4) The fiancé would have to report this as ordinary income.

Answer 1

If the gift value is less than the gift tax exclusion limit, there would be no gift tax for the fiancé. The giver would be responsible for paying any gift tax if applicable.

Step-by-step explanation:

The tax consequence of giving a gift to your daughter's fiancé depends on the value of the gift and the annual gift tax exclusion limit set by the Financial Industry Regulatory Authority (FINRA).

The FINRA gift limit for 2021 is $15,000 per person per year. If the value of the watch exceeds this limit, then it would be considered a taxable gift and subject to gift tax. However, the person responsible for paying the gift tax would be the giver (you), not the recipient (the fiancé).

In this case, since the gift value of $5,575 is less than the FINRA gift limit, there would be no gift tax for your daughter's fiancé. He does not have to report it as ordinary income either because it is a gift and not a payment for services rendered.