Article 6.
Gift Taxes.
§ 105‑188. (Repealed effective January 1, 2009) Gift taxes; classification of beneficiaries; exemptions; rates of tax.
(a) State gift taxes, as hereinafter prescribed, are hereby levied upon the shares of the respective beneficiaries in all property within the jurisdiction of this State, real, personal and mixed, and any interest therein which shall in any one calendar year pass by gift made after March 24, 1939.
(b) The taxes shall apply whether the gift is in trust or otherwise and whether the gift is direct or indirect. In the case of a gift made by a nonresident, the taxes shall apply only if the property is within the jurisdiction of this State. The taxes shall not apply to gifts made prior to March 24, 1939.
(c) The tax shall not apply to the passage of property in trust where the power to revest in the donor title to such property is vested in the donor, either alone or in conjunction with any person not having substantial adverse interest in the disposition of such property or the income therefrom, but the relinquishment or termination of such power (other than by the donor's death) shall be considered to be a passage from the donor by gift of the property subject to such power, and any payment of the income therefrom to a beneficiary other than the donor shall be considered to be a passage by donor of such income by gift.
(d) Annual Exclusion. – The annual exclusion amount is equal to the federal inflation‑adjusted exclusion amount provided in section 2503(b) of the Code. Gifts not exceeding a total value equal to the annual exclusion amount made to any one donee in a calendar year are not taxable under this Article. When gifts exceeding a total value equal to the annual exclusion amount are made to any one donee in a calendar year, only the portion of the gifts exceeding the annual exclusion amount in value is taxable under this Article. This exclusion does not apply to gifts of future interests in property. For the purposes of determining the annual exclusion, no part of a gift to an individual, or in trust for an individual, who has not attained the age of 21 years on the date of the transfer is considered a gift of a future interest in property if the property and the income therefrom meet all of the following conditions: (i) they may be expended by, or for the benefit of, the donee before the donee reaches the age of 21 years; (ii) they will to the extent not so expended pass to the donee when the donee reaches the age of 21 years; and (iii) they will, in the event the donee dies before reaching that age, be payable to the estate of the donee or as the donee may appoint under a general power of appointment.
When a gift is made by one spouse to a person other than the donor's spouse, the donor may claim both the donor's annual exclusion and the spouse's annual exclusion if both spouses consent and both spouses are residents of this State when the gift is made. Consent to share annual gift tax exclusions must be made in writing on a timely filed gift tax return. Once given, consent to share annual exclusions is irrevocable.
(e) The tax shall be based on the aggregate sum of the net gifts made by the donor to the same donee, and shall be computed as follows:
(1) Determine the aggregate sum of the net gifts to the donee for the calendar year and the net gifts to the same donee for each of the preceding calendar years since January 1, 1948.
(2) Compute the tax upon said aggregate sum by applying the rates hereinafter set out.
(3) From the tax thus computed, deduct the total gift tax, if any, computed with respect to gifts to the same donee in any prior year or years since January 1, 1948. The sum thus ascertained shall be the gift tax due.
The term "net gifts" shall mean the sum of the gifts made by a donor to the same donee during any stated period of time in excess of the annual exclusion and the applicable specific exemption.
(f) The rates of tax, which are based on the relationship between the donor and the donee, shall be as follows:
(1) Where the donee is the lineal issue, lineal ancestor, adopted child, or stepchild of the donor (for each one hundred dollars ($100.00) or fraction thereof):
First $ 10,000 above exemption.................................................................. 1 percent
Over $ 10,000 and to $ 25,000............................................................ 2 percent
Over $ 25,000 and to $ 50,000............................................................ 3 percent
Over $ 50,000 and to $ 100,000............................................................ 4 percent
Over $ 100,000 and to $ 200,000............................................................ 5 percent
Over $ 200,000 and to $ 500,000............................................................ 6 percent
Over $ 500,000 and to $ 1,000,000............................................................ 7 percent
Over $1,000,000 and to $ 1,500,000............................................................ 8 percent
Over $1,500,000 and to $ 2,000,000............................................................ 9 percent
Over $2,000,000 and to $ 2,500,000.......................................................... 10 percent
Over $2,500,000 and to $ 3,000,000.......................................................... 11 percent
Over $3,000,000............................................................................................. 12 percent
(2) Where the donee is the brother or sister, or descendant of the brother or sister, or is the uncle or aunt by blood of the donor (for each one hundred dollars ($100.00) or fraction thereof):
First $ 5,000............................................................................................. 4 percent
Over $ 5,000 and to $ 10,000............................................................ 5 percent
Over $ 10,000 and to $ 25,000............................................................ 6 percent
Over $ 25,000 and to $ 50,000............................................................ 7 percent
Over $ 50,000 and to $ 100,000............................................................ 8 percent
Over $ 100,000 and to $ 250,000.......................................................... 10 percent
Over $ 250,000 and to $ 500,000.......................................................... 11 percent
Over $ 500,000 and to $ 1,000,000.......................................................... 12 percent
Over $1,000,000 and to $ 1,500,000.......................................................... 13 percent
Over $1,500,000 and to $ 2,000,000.......................................................... 14 percent
Over $2,000,000 and to $ 3,000,000.......................................................... 15 percent
Over $3,000,000............................................................................................. 16 percent
(3) Where the donee is in any other degree of relationship than is hereinbefore stated, or shall be a stranger in blood to the donor, or shall be a body politic or corporate (for each one hundred dollars ($100.00) or fraction thereof):
First $ 10,000............................................................................................. 8 percent
Over $ 10,000 and to $ 25,000............................................................ 9 percent
Over $ 25,000 and to $ 50,000.......................................................... 10 percent
Over $ 50,000 and to $ 100,000.......................................................... 11 percent
Over $ 100,000 and to $ 250,000.......................................................... 12 percent
Over $ 250,000 and to $ 500,000.......................................................... 13 percent
Over $ 500,000 and to $ 1,000,000.......................................................... 14 percent
Over $1,000,000 and to $ 1,500,000.......................................................... 15 percent
Over $1,500,000 and to $ 2,500,000.......................................................... 16 percent
Over $2,500,000............................................................................................. 17 percent
(g) A donor is entitled to a total exemption of one hundred thousand dollars ($100,000) to be deducted from gifts made to donees named in subdivision (f)(1), less the sum of amounts claimed and allowed as an exemption in prior calendar years. The exemption, at the option of the donor, may be taken in its entirety in a single year or may be spread over a period of years. When this exemption has been exhausted, no further exemption is allowable. When the exemption or any part of the exemption is applied to gifts to more than one donee in any one calendar year, the exemption shall be apportioned against the gifts in the same ratio as the gross value of the gifts to each donee is to the total value of all the gifts made in the calendar year. No exemption is allowed a donor for gifts made to donees named in subdivision (f)(2) or (f)(3).
(h) It is expressly provided, however, that the tax levied in this Article shall not apply to so much of said property as shall so pass exclusively:
(1) For state, county or municipal purposes within this State;
(2) To or for the exclusive benefit of charitable, educational, or religious organizations located within this State, no part of the net earnings of which inures to the benefit of any private shareholder or individual;
(3) To or for the exclusive benefit of charitable, religious and educational corporations, foundations and trusts, not conducted for profit, incorporated or created or administered under the laws of any other state, when such other state levies no gift taxes upon property similarly passing from residents of such state to charitable, educational or religious corporations, foundations and trusts incorporated or created or administered under the laws of this State, or when such corporation, foundation or trust receives and disburses funds donated in this State for religious, charitable and educational purposes; or
(4) To one spouse from the other spouse.
(i) The tax does not apply to tuition payments made on behalf of an individual to an educational institution or to medical payments made on behalf of an individual to a provider of medical care, as defined in the Code for the care of that individual. The term "educational institution" includes only those institutions that normally maintain a regular faculty and curriculum and normally have a regularly organized body of students in attendance where the educational activities are conducted.
(j) The tax does not apply to property transferred to a spouse when the transfer of the property is exempt from federal estate and gift taxes under section 2523(f) of the Code because it is considered qualified terminable interest property.
(k) Qualified Tuition Programs. – The provisions of section 529(c)(2) and (5) of the Code apply to this Article. If a donor elects to take a contribution into account ratably over a five‑year period as provided in section 529(c)(2) of the Code, that election applies for the purposes of this Article. (1939, c. 158, s. 600; 1943, c. 400, s. 7; 1945, c. 708, s. 7; 1947, c. 501, s. 6; 1957, c. 1340, s. 6; 1973, c. 505; c. 1287, s. 9; 1983, c. 685, s. 1; 1983 (Reg. Sess., 1984), c. 1023, s. 1; c. 1024; 1985, c. 86; c. 656, ss. 4‑6; 1989 (Reg. Sess., 1990), c. 814, s. 24; 1991 (Reg. Sess., 1992), c. 1007, s. 5; 1996, 2nd Ex. Sess., c. 13, s. 6.3; 1998‑98, s. 63; 1998‑171, s. 4; 2002‑126, s. 30C.5(a); 2008‑107, s. 28.18(a).)
§ 105‑188.1. (Repealed effective January 1, 2009) Powers of appointment.
(a) For purposes of this Article "general power of appointment" shall mean any power of appointment which is exercisable in favor of the individual possessing the power (hereinafter in this section referred to as the "possessor"), his estate, his creditors, or the creditors of his estate; except that:
(1) A power to consume, invade, or appropriate property for the benefit of the possessor which is limited by an ascertainable standard relating to the health, education, support or maintenance of the possessor shall not be deemed a general power of appointment.
(2) In the case of a power of appointment which is exercisable by the possessor only in conjunction with another person:
a. If the power is not exercisable by the possessor except in conjunction with the creator of the power, such power shall not be deemed a general power of appointment.
b. If the power is not exercisable by the possessor except in conjunction with a person having a substantial interest, in the property subject to the power, which is adverse to exercise of the power in favor of the possessor, such power shall not be deemed a general power of appointment. For the purposes of this clause a person who, after the death of the possessor, may be possessed of a power of appointment (with respect to the property subject to the possessor's power) which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor's power.
c. If (after the application of clauses a and b) the power is a general power of appointment and is exercisable in favor of such other person, such power shall be deemed a general power of appointment only in respect of a fractional part of the property subject to such power, such part to be determined by dividing the value of such property by the number of such persons (including the possessor) in favor of whom such power is exercisable.
d. For purposes of clauses b and c, a power shall be deemed exercisable in favor of a person if it is exercisable in favor of such person, his estate, his creditors, or the creditors of his estate.
(b) Any person having a general power of appointment with respect to any interest in property shall for gift tax purposes be deemed to be the owner of such interest, and accordingly:
(1) If in connection with any gift of property the donor shall give to any person a general power of appointment with respect to any interest in such property, the donor shall be deemed to have given such person such interest in such property.
(2) If any person holding a general power of appointment with respect to any interest in property shall exercise such power in favor of any other person or persons, he shall be deemed to have made a gift of such interest to such person or persons.
(3) If any person holding a general power of appointment with respect to any interest in property shall relinquish such power, he shall be deemed to have made a gift of such interest to the person or persons who shall benefit by such relinquishment.
(4) The lapse of a general power of appointment during the life of the individual possessing the power shall be considered a relinquishment of the power. The rule of the preceding sentence shall apply with respect to the lapse of such powers during any calendar year only to the extent that the interest in property which could have been appointed by exercise of the lapsed power exceeds in value the greater of the following amounts:
a. Five thousand dollars ($5,000) or
b. Five percent (5%) of the aggregate value of the interest in property out of which, or the proceeds of which, the exercise of the lapsed power could be satisfied.
(c) Neither the exercise nor the relinquishment of a special power of appointment with respect to an interest in property shall be deemed to constitute a gift of such interest in such property.
(d) If in connection with any gift of property the donor shall give to any person a special power of appointment with respect to any interest in such property, the donor shall be deemed for gift tax purposes to have given such interest in equal shares to those persons, not more than two, among the possible appointees and takers in default of appointment whom the donor or his executor or administrator may designate in the gift tax return filed with respect to such gift. But the tax shall be computed according to the relationship of the donee of the power to the person designated if:
(1) The possible appointees and takers in default of appointment include any persons more closely related to the donee of the power than to the donor, and
(2) Such computation would produce a higher tax. (1963, c. 942; 1967, c. 1110, s. 7; 1987, c. 556; 2008‑107, s. 28.18(a).)
§ 105‑189. (Repealed effective January 1, 2009) Transfer for less than adequate and full consideration.
Where property is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this Article, be deemed a gift and shall be included in computing the amount of gifts made during the calendar year. (1939, c. 158, s. 601; 2008‑107, s. 28.18(a).)
§ 105‑190. (Repealed effective January 1, 2009) Gifts made in property.
If the gift is made in property, the fair market value thereof at the date of the gift shall be considered the amount of the gift. (1939, c. 158, s. 602; 2008‑107, s. 28.18(a).)
§ 105‑191: Repealed by Session Laws 1995 (Regular Session, 1996), c. 646, s. 7.
§ 105‑192. Repealed by Session Laws 1959, c. 1259, s. 9.
§ 105‑193. (Repealed effective January 1, 2009) Lien for tax; collection of tax.
The tax imposed by this Article shall be a lien upon all gifts that constitute the basis for the tax for a period of 10 years from the time they are made. If the tax is not paid by the donor when due, each donee shall be personally liable, to the extent of their respective gifts, for so much of the tax as may have been assessed, or may be assessable thereon. Any part of the property comprised in the gift that may have been sold by the donee to a bona fide purchaser for an adequate and full consideration in money or money's worth shall be divested of the lien hereby imposed and the lien, to the extent of the value of such gift, shall attach to all the property of the donee (including after‑acquired property) except any part sold to a bona fide purchaser for an adequate and full consideration in money or money's worth.
If the tax is not paid within 30 days after it has become due, the Department of Revenue may use any of the methods authorized in this Subchapter for the collection of other taxes to enforce the payment of taxes assessed under this Article.
In any proceeding by warrant or otherwise to enforce the collection of said tax, the donor shall be liable for the full amount of the tax due by reason of all the gifts constituting the basis for such tax, and each donee shall be liable only for so much of said tax as may be due on account of his respective gift. (1939, c. 158, s. 605; 2008‑107, s. 28.18(a).)
§ 105‑194. (Repealed effective January 1, 2009) Death of donor within three years; time of assessment.
If a donor dies within three years after filing a return, gift taxes may be assessed at any time within those three years, or on or before the date of final settlement of the donor's State estate or inheritance taxes, whichever is later. (1939, c. 158, s. 606; 1947, c. 501, s. 6; 1959, c. 1259, s. 10; 1999‑337, s. 33; 2008‑107, s. 28.18(a).)
§ 105‑195. (Repealed effective January 1, 2009) Tax to be assessed upon actual value of property; manner of determining value of annuities, life estates and interests less than absolute interest.
Said taxes shall be assessed upon the actual value of the property at the time of the transfer by gift. If the gift subject to said tax be given to a donee for life or for a term of years, or upon condition or contingency, with remainder to take effect upon the termination of the life estate or term of years or the happening of the condition or contingency, the tax on the whole amount shall be due and payable as in other cases, and said tax shall be apportioned between such life tenant or tenant for years and the remainderman, such apportionment to be made by computation based upon the mortuary and annuity tables set out in G.S. 8‑46 and 8‑47 of the General Statutes, and upon the basis of six per centum (6%) of the gross value of the property for the period of expectancy of the life tenant or for the term of years in determining the value of the respective interests. When property is transferred or limited in trust or otherwise, and the rights or interests of the transferees or beneficiaries are dependent upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended, or abridged, a tax shall be imposed upon said transfer at the highest rate, within the discretion of the Secretary of Revenue, which on the happening of any of the said contingencies or conditions would be possible under the provisions of this section, and such tax so imposed shall be due and payable forthwith by the donor, and the Secretary of Revenue shall assess the tax on such transfers. (1939, c. 158, s. 607; 1943, c. 400, s. 7; 1955, c. 1353, s. 1; 1973, c. 476, s. 193; 1985, c. 44; 2008‑107, s. 28.18(a).)
§ 105‑196: Repealed by Session Laws 1995 (Regular Session, 1996), c. 646, s. 7.
§ 105‑197. (Repealed effective January 1, 2009) When return required; due date of tax and return.
(a) When Return Required. – Anyone who, during the calendar year, gives to a donee a gift of a future interest or one or more taxable gifts whose total value exceeds the amount of the annual exclusion set in G.S. 105‑188(d) must file a gift tax return, under oath or affirmation, with the Secretary on a form prescribed by the Secretary. For the purpose of this section, a taxable gift is a gift that is not exempt under G.S. 105‑188(h) or (i).
(b) Due Date. – The tax is due on April 15th following the end of the calendar year. A return must be filed on or before the due date of the tax. A taxpayer may ask the Secretary of Revenue for an extension of time for filing a return under G.S. 105‑263. (1939, c. 158, s. 609; 1955, c. 22, s. 1; 1973, c. 1287, s. 9; 1985 (Reg. Sess., 1986), c. 821; 1991 (Reg. Sess., 1992), c. 930, s. 10; 1995 (Reg. Sess., 1996), c. 646, s. 8; 1998‑98, s. 16; 2008‑107, s. 28.18(a).)
§ 105‑197.1. (Repealed effective January 1, 2009) Federal corrections.
If the amount of a taxpayer's net gifts is corrected or otherwise determined by the federal government, the taxpayer must, within six months after being notified of the correction or final determination by the federal government, file a gift tax return with the Secretary reflecting the corrected or determined net gifts. The Secretary must propose an assessment for any additional tax due from the taxpayer as provided in Article 9 of this Chapter. The Secretary must refund any overpayment of tax as provided in Article 9 of this Chapter. A taxpayer who fails to comply with this section is subject to the penalties in G.S. 105‑236 and forfeits the right to any refund due by reason of the determination. (1973, c. 1287, s. 10; 1993 (Reg. Sess., 1994), c. 582, s. 6; 2006‑18, s. 6; 2007‑491, s. 22; 2008‑107, s. 28.18(a).)