Understanding Taxable Gifts: What Penske Automotive Group Employees Need to Know Before Making Their Next Move

Healthcare Provider Update: Healthcare Provider for Penske Automotive Group Penske Automotive Group employees typically receive healthcare coverage through a variety of providers depending on their specific plan selections, with major national insurers like Kaiser Permanente, UnitedHealthcare, and Anthem BlueCross BlueShield being among the options available. The exact provider often varies by location and the specific plan chosen during open enrollment. Healthcare Cost Projections for 2026 The healthcare landscape is set for significant upheaval in 2026, with potential premium hikes expected to exceed 75% for many Affordable Care Act (ACA) marketplace enrollees, largely due to the expiration of enhanced federal subsidies. Penske Automotive Group employees, particularly those nearing retirement, may face steep increases in their healthcare costs as insurers respond to rising medical expenses and price inflation. With the ACA marketplace seeing some state requests for premium increases reaching as high as 66%, careful financial planning will be essential for employees heading into another challenging year in healthcare affordability. Click here to learn more

What Are Taxable Gifts?

Property you give away during your life may be taxable gifts subject to the federal gift and estate tax for Penske Automotive Group employees. You or your estate could pay as much as a 40 percent tax (in 2019 and 2020) on taxable gifts. To estimate and reduce this tax, you need to understand what taxable gifts are and how the federal gift and estate tax system works.

Caution:  Some states impose their own gift tax.

Tip:  Generally, gifts Penske Automotive Group employees receive are not subject to tax (except for some states that tax inheritances). However, gifts or bequests (in the form of money or property) received from a foreign person or estate that are valued (in the aggregate per year) at more than $100,000 are reportable, as are gifts in excess of $17,000 in 2023, which is an increase from $16,000 in 2022. Recipients of such gifts must file Form 3520 with the IRS on or before the due date of the recipient's income tax return (including extensions). Failure to do so may subject the recipient to a penalty of 5 percent of the value of the gift for each month the gift goes unreported (not to exceed a total of 25 percent of the gift). Excluded from this rule are gifts made directly to a school for tuition or to a healthcare provider for medical expenses.

How Does the Federal Gift and Estate Tax System Work?

Taxable gifts are treated in a special way.

•  First, taxable gifts must be reported, and the gift tax is paid annually. Penske Automotive Group employees must file a gift tax return and pay the gift tax due, if any, by April 15 of the tax season that follows the year in which they make a taxable gift.
•  Second, when you die, all taxable gifts made during your lifetime are added to your taxable estate (property you own at death) in order to calculate any estate tax that may be owed. This pushes your net taxable estate (what the estate tax is computed on) into a higher tax bracket. Any gift tax you paid is deducted from any estate tax owed.

Caution:  Lifetime gifts to beneficiaries who are more than one generation below you may also be subject to the federal generation-skipping transfer tax.

Is It a Gift?

Gifts can be made either directly (i.e., from you to another person) or indirectly (i.e., from you to another person for the benefit of a third party). To determine whether a taxable gift has occurred, the answer to the following questions must be yes.

•  Was the gift voluntary? — Did you freely give property to another individual or organization? Transfers of property that you are legally obligated to make are not gifts. For example, payments you make to support your minor children, or payments you make as a result of a court judgment, are not gifts.
•  Was the gift complete? — Penske Automotive Group employees must relinquish control over the property. A taxable gift has not occurred if you retain the power to change or revoke the gift. A gift is complete only upon delivery. Completion of delivery varies according to the nature of the gift. For example, a gift of cash is complete when given, a gift of a personal check is complete when paid, a gift of stock is complete on the date the endorsed certificate is delivered, and a gift of real estate is complete when the deed is recorded.
•  Was the gift made in exchange for nothing or property of lesser value? — Ordinarily, you may think of a gift as something you give expecting nothing in return. But gifts also include uneven exchanges of property. The value of the gift is the difference between the exchange.

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Example(s):  Alec gives his old Harley-Davidson motorcycle, valued at $3,000, to his younger brother, William, in exchange for $500. Alec has made a $2,500 gift.

Caution:  An uneven exchange is not a gift, however, if it is a legitimate business sale or just a bad bargain.

Is it a Taxable Gift?

Some types of gifts are exempt from the gift tax. These include:

•  Tuition paid to an educational institution — Penske Automotive Group employees can pay for tuition at a private school, college, or other qualified educational institution without incurring gift tax as long as the payment is made directly to the institution. This exclusion is limited to tuition costs and does not include payments for books, supplies, or dormitory fees. You don't need to file a gift tax return with respect to this type of gift.
•  Medical expenses paid to the medical care provider — Penske Automotive Group employees can pay for someone else's medical bills without incurring gift tax as long as payment is made directly to the medical care provider. This exclusion is not allowed for amounts reimbursed by insurance. You don't need to file a gift tax return with respect to this type of gift. • Annual gift tax exclusion — You are allowed to exclude $15,000 (in 2019 and 2020) of gifts given to each and every person or organization each year from the amount subject to tax, provided that the gift is of a present interest in property.

Tip: For gifts made after August 5, 1997, Penske Automotive Group employees don't need to file an annual gift tax return with respect to gifts that are within the annual gift tax exclusion unless you have split gifts with your spouse or have made a partial interest gift to charity (a partial interest gift is split between charitable and noncharitable beneficiaries).

Tip:  The annual gift tax exclusion may also reduce the federal generation-skipping transfer tax.

•  Gifts to spouses — Qualified gifts to spouses are fully deductible under the unlimited marital deduction if your spouse is a U.S. citizen. Gifts you give to your non-U.S. citizen spouse qualify for a $157,000 (in 2020, $155,000 in 2019) annual gift tax exclusion, but no unlimited marital deduction is allowed.

Tip: For gifts made after August 5, 1997, interspousal gifts that fully qualify for the unlimited marital deduction need not be reported on a gift tax return for the year unless other taxable gifts or partial interest gifts to charity have also been made (partial interest gifts are split between charitable and noncharitable beneficiaries).

•  Gifts to charity — Qualified gifts to charity are fully deductible under the charitable deduction for Penske Automotive Group employees.

Tip:  Gifts to charity made after August 5, 1997, need not be reported if all gifts for that year are fully deductible under the charitable deduction.

•  Applicable exclusion amount — The applicable exclusion amount effectively exempts the first $11,580,000 (in 2020, $11,400,000 in 2019) plus any deceased spousal unused exclusion amount of taxable gift you make. You must use your applicable exclusion amount before you become liable for any gift tax. Any applicable exclusion amount you use for lifetime gifts effectively reduces the amount that will be available at your death.