After a donation is made, who bears the income tax liability for the income generated from the donated property until it is registered?

After a donation is made, who bears the income tax liability for the income generated from the donated property until it is registered?

• A. The donee
• B. The donor
• C. The estate of the donor
• D. The government

Answer: (A)

When a donation is made, the donee generally assumes the income tax liability for any income generated from the donated property after the transfer of ownership, even if the property is not yet formally registered in their name. This is because, for tax purposes, the donee is considered the new owner of the property once the donation is completed, and they are entitled to any income derived from that property. The donor typically doesn't retain any income tax liability for the donated property after the transfer takes place, nor does the donor’s estate once they have relinquished control. Although the government may levy taxes based on the property's earnings, it is the donee who is responsible for reporting any income generated since they have effectively become the holder of the investment. Therefore, the correct answer reflects the principle that ownership is pivotal in determining tax liability for income generated from property, which shifts to the donee upon the donation being made.

When a donation is made, the donee generally assumes the income tax liability for any income generated from the donated property after the transfer of ownership, even if the property is not yet formally registered in their name. This is because, for tax purposes, the donee is considered the new owner of the property once the donation is completed, and they are entitled to any income derived from that property.

The donor typically doesn't retain any income tax liability for the donated property after the transfer takes place, nor does the donor’s estate once they have relinquished control. Although the government may levy taxes based on the property's earnings, it is the donee who is responsible for reporting any income generated since they have effectively become the holder of the investment.

Therefore, the correct answer reflects the principle that ownership is pivotal in determining tax liability for income generated from property, which shifts to the donee upon the donation being made.