Is Obama liable for gift taxes on this?

[furface]

http://news.yahoo.com/s/ap/20101102/ap_on_re_us/us_dear_mr_president

My take on the tax code is that he's in fact liable for gift tax, which in his case would be about 35%. Basically the way the IRS seems to interpret the gift tax is that gifts that have provable market value, for instance a president's hand written letter, are liable for gift tax. If I gave someone an original George Washington letter, I would have to pay gift taxes on it. Same thing should hold for a living president.

I'm not saying it should be taxed, only that the idiotic tax code and the way the IRS is interpreting it makes it taxable. Obama is essentially a tax evader for not paying it.

[KCIndy]

Actually, from what I can decipher from the IRS web page, there's a $13,000 per recipient exclusion on the gift tax:

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

Since the letter sold for $7,000 I would assume that it would be covered by the exclusion. The secondary question is, would the woman be liable for capital gains tax? I'm not sure about that one.

[furface]

It could also be interpreted as a capital gain, but the problem with that interpretation is that you'd want to get the original market value when it was gifted to her by Obama in order get the net capital gain. That original value would be close to $7000 I think, so there is really no capital gain. It's most correctly looked at as a gift by Obama in my view.

Don't get me wrong. I'm not at all suggesting that it should be viewed this way. I'm just pointing out that Obama can be construed as a serious tax evader using the rules that apply to the vast majority of Americans.

It could also be construed as ordinary income in which she would be liable for SE tax, which is around 15%, I think which would be higher than her capital gain rate. It looks like she doesn't have much other source of income so she would be just paying SE tax, which happens to be very regressive.

It appears you're right about the exclusion though. I'm guessing he gives people collectible stuff that's valued at more than $13k though. This is a big problem for people transferring things like family businesses to their children. Obama just walks around and gives people free money without being taxed, probably amounting to millions and millions of dollars. It isn't right.

[angelatc]

Actually, from what I can decipher from the IRS web page, there's a $13,000 per recipient exclusion on the gift tax:

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

Since the letter sold for $7,000 I would assume that it would be covered by the exclusion. The secondary question is, would the woman be liable for capital gains tax? I'm not sure about that one.

You are correct in that he is exempt from the gift tax for that reason.

She is indeed liable for either income or capital gains tax on the letter, whichever is lower.