Do look a gift horse in the mouth. As I read more and more about the tendency of Virginia’s elected officials to line their pockets with other people’s money I began wondering about the tax implications of such “perks of political office.” Even to a layman like me the IRS rules on gifts seem pretty straightforward. The only slight debate on gift taxes relates to who should pay the tax. Per the IRS website: “The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead.”
For the love of loopholes. One big loophole in gift taxes is the exclusion amount. The IRS code allows a tax-free giving of gifts up to a certain amount each year. In its benevolence to the wealthy Congress has been rapidly escalating this exclusion level in recent years. The annual exclusion applies to each donee and is $11,000 in 2002-2005, $12,000 in 2006-2008, $13,000 in 2009-2012 and $14,000 on or after January 1, 2013.
Virginia’s hall of shame. Virginia politicians love their “gifts.” They can take pretty much anything in any quantity from anybody. The only requirement is that they disclose the gifts (a requirement apparently too onerous for Ken Cuccinelli). So, let’s take a trip down memory lane and look at some of the “gifts” received by the former governor, the current governor and the would be governor.
Tim Kaine. Kaine wasted no time in reaping the benefits of elected office. In 2005 Kaine accepted a five star Caribbean vacation from Albermarle County investor James B. Murray, Jr. Kaine reported the value of the gift at $18,000. In 2005 the exclusion limit was $11,000. So, we have a $7,000 overage. Assuming this overage was taxable – did anybody pay the taxes on that $7,000?
Bob McDonnell. The McDonnell clan loves gifts. In fact, they love gifts so much it can be hard to sort it all out. Fortunately, Progressiveva has sorted it out for us. Just from Star Scientific to Bob McDonnell we see $2,268 in lodging and entertainment in 2011 and $7,382 in free air fare in 2012. Of course there is also that pesky $15,000 gift to McDonnell’s daughter in 2011 as well. McDonnell falls below the exclusion allowance in 2011 and 2012 but his daughter does not. The $15,000 gift should have generated a taxable $2,000 in 2011. Did anybody pay the taxes on that?
Ken Cuccinelli. It is said that elephants never forget. However, members of the elephant clan are not so lucky. Ken “what day is it?” Cuccinelli seems hard pressed to remember all the gifts he has received from Star Scientific over the years. So far, Cuccinelli has managed to recollect $12,965 in gifts from Star Scientific in 2011 and $3,000 in 2012. Lucky Kenny comes in $35 below the $13,000 exclusionary limit in 2011. Let’s hope our Attorney General doesn’t have any more flashes of lucidity in remembering any additional gifts from Star Scientific in 2011.
To be clear. The donors or recipients may have very well paid the required taxes on the value of the gifts exceeding the exclusion level. But given the sensitivity of these gifts and the fact that all three gentlemen are presently elected officials, shouldn’t Kaine and McDonnell publicly verify that all the required taxes were paid? A simple public statement saying that all required federal and state taxes were paid would be enough for me.
- D.J. Rippert