Did you know that some of your gifts could be included in your income tax calculation?
But only those that the IRS says are "not really" gifts.
Let's break this concept down.
Also, keep in mind that there is a tax that is entirely separate from income tax and it is called "gift tax." It has its own tax return and its own set of tax rules. But gift tax is beyond the scope of this post.
1. Gifts are generally excluded from gross income.
Not so fast. If it doesn't walk like a duck or talk like a duck, can you really call it a duck?
First of all, the income produced by the gift must be reported. Thus, if the tree is the gift, you don't report it but you must report the apples it produces. Or, if the gift is a house, you don't report the house but you report the rental income you get from the tenants.
Secondly, you can't simply slap on the name "gift" just to avoid including it in your income tax calculation. In one case interpretting the taxation of gifts, the Supreme Court described "gifts" as being characterized by "a detached and disinterested generosity out of affection, respect, admiration charity or like impulses."

