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My step-father naively, but with good intentions gave away my recently deceased mom's car to a family friend. I'm guessing the vehicle is worth $20k - over the $14,000 allowance for gift tax.

He certainly has no idea about the tax rules surrounding this, and likely neither does the recipient. Because of this, without any intervention by myself, he won't be reporting the gift on his taxes.

What are the ramifications of this - and how would the IRS even know this exchange took place? If it matters, there is probably no will, and with the recentness of my mother's passing, no probate things (not sure of the terminology) have taken place.

Please know, I'm not asking for ways to skirt the tax system, but some guidance on how this can come back to harm him, financially. This will help me decide how much (if at all) I need to butt in.

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    Did he sign the title over? The recipient will need to register the car, get a tag, etc. so there's plenty of paper trail.
    – D Stanley
    Commented Apr 25, 2017 at 15:47
  • Possible duplicate of Tax Consequences of a Gift
    – NL - SE listen to your users
    Commented Apr 25, 2017 at 16:11
  • @NathanL I saw this question before I asked. I'm not sure it is a duplicate, as I'm interested in learning what happens if the 709 is not filed and how the IRS would find out that the gift was given..
    – InbetweenWeekends
    Commented Apr 25, 2017 at 17:52
  • @DStanley Good point. I believe he has. But it makes me wonder if the IRS would ever find out about the title transfer.
    – InbetweenWeekends
    Commented Apr 25, 2017 at 17:53

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In all likelihood, the IRS will not find out about the gift. If the IRS does find out about the gift, there will not be any penalty unless your father's estate is above $5.49 million (2017 estate tax exclusion), in which case the portion above $14,000 (2017 gift tax exclusion) will be subtracted from that lifetime limit.

Also note that if the car was gifted to a couple, the limit would be $28,000 ($14,000 for each recipient) and it wouldn't exceed the gift tax limit. If your mother were alive and she and your dad were co-owners of the car, they could give a $56,000 car to a couple, or a $28,000 car to an individual because that limit applies to each of the givers and each of the receivers separately.

None of the above removes the requirement to file the gift tax return that Pete mentioned.

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You may want to see this page: The Gift Tax Made Simple.

He'll should file a form 709, but unless his estate is high, like over 5 million, this will be meaningless. Estate tax laws could always change but I doubt they would that drastically.

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    +1. If the OP's step-father fills out the right forms, this should have no cost to him in increased taxes. It's also worth noting that the recipient never owes taxes on a gift.
    – Ben Miller
    Commented Apr 25, 2017 at 16:05
  • But see OPs comment. He wants to know what happens if the form is not sent in.
    – JTP - Apologise to Monica ♦
    Commented Apr 25, 2017 at 19:08

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