Q:

Do you add tax exempt inheritances or gifts to your gross income on your Form 1040?

A:

Quick Answer

Tax exempt gifts and inheritances are not included on Form 1040 as gross income, as of 2015. If the gift or inheritance is an income-producing asset, then any income gained from the asset is taxable income included in the gross income total. The giver may be required to file a gift tax return, Form 709, states the Internal Revenue Service (IRS).

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Full Answer

According to the IRS, gifts and inheritances are not taxable income on Form 1040 even if the gift is real estate or an income-producing asset. Income produced by the gift, such as rent or interest payments to the owner, is taxable income that should be listed as part of gross income. Gifts and inheritances may be taxed when the giver files a Form 709 for a gift larger than $14,000 in value, as of 2015. This return should be filed even if gift tax is not owed. If the property is sold and the proceeds are given as a gift, then the beneficiary may owe capital gains taxes. Otherwise, the beneficiary does not pay taxes on the gift except on income produced by the asset. Gross income should include any income produced by assets along with other income earned or received by the taxpayer.

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