17.7 Gifts, Inheritance, and Dependent Allowances

Genuine gifts are not consumption

A genuine monetary gift is a voluntary transfer for which the recipient provides no Product, service, obligation, reciprocal transfer, or other consideration. Inheritances and dependent allowances have the same essential character: value passes to a recipient without being payment for consumption.

Receiving that value is therefore not subject to consumption tax. The recipient may retain it, use it for production, or invest it without paying consumption tax. If the recipient later uses the value to acquire Products for consumption, the ordinary account-based consumption tax applies at that time.

The "gift" Product Category

A B-account with the Product Category "gift" may be used only to make or receive genuine monetary gifts, inheritances, and dependent allowances. This restriction applies to every owner of a "gift" account, regardless of citizenship.

Citizens must make and accept these monetary transfers through "gift" B-accounts. Requiring the transfer to pass between accounts dedicated to this purpose distinguishes gifts from commercial payments while allowing genuine transfers to remain untaxed until their value is used for consumption.

Purpose descriptions and auditing

Because anyone may own a "gift" account and transfers through it are not taxed, gift accounts could otherwise be used to conceal commerce. The sender must therefore provide a truthful description of the purpose of each gift and declare that it is not consideration for anything. A description might say, for example, that the transfer is a birthday present or family support.

The description does not prove that a transfer is genuine, but it creates a contemporaneous representation of its purpose. The CBPS examines all gift-account records automatically under uniform rules for evidence of commerce or tax evasion. Identifiable records may be inspected by the public service responsible for preventing tax fraud only under a warrant based on probable cause. This permits gift-account auditing without requiring account owners to file tax returns, maintain separate tax records, or submit to discretionary personal audits.

Inheritance

When the Identity System records a verified death event, the Central Bank Payment System places the deceased Person's accounts into estate settlement. After the applicable legal process determines the lawful recipients and allocations, the system transfers the remaining value and closes the accounts. Estate transfers are untaxed administrative transfers.

A Citizen receives inherited Central Bank value through a "gift" B-account. Receiving the inheritance is not consumption, but any later use of the inherited value for consumption is taxed in the ordinary way.

Dependent allowances

A dependent allowance is treated as a gift when it provides monetary support without consideration. It is received without consumption tax, while purchases subsequently made using the allowance remain subject to the ordinary consumption-tax rules.

Gifts cannot disguise purchases

Calling a transfer a gift does not make it one. A transfer made in exchange for a Product, service, promise, reciprocal payment, debt cancellation, or other benefit is consideration and must follow the account and tax treatment applicable to its actual purpose. A purchase cannot become untaxed merely by routing its payment through a "gift" account or describing the payment as a gift.