gift tax

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Gift tax

A tax assessed on the giver of a property or asset as a gift. A $10,000 federal gift tax exemption exists per recipient. See: Gift splitting.

Gift Tax

A tax that the federal government levies on givers of gifts in excess of a certain value. If the value of a gift is over a certain amount, which varies from year to year but is always over $10,000, the government assesses the gift tax. The tax applies even if the recipient pays for the gift, so long as he/she does not pay for the full value. Generally speaking, payments for medical, educational, and political purposes are exempt from the gift tax, as are gifts to one's spouse.

gift tax

A federal tax that is imposed on the giver and determined on the basis of a unified gift and estate tax schedule. Annual gifts above a specified amount per recipient are deducted from a lifetime exemption. This exemption applies jointly to accumulated gifts and to the taxable estate left at death. In most cases, only relatively large gifts incur a tax. See also unified credit.

Gift tax.

A gift tax is a tax on the combined total value of the taxable gifts you make that exceed your lifetime federal tax-exempt limit of $1 million. The tax is figured as a percentage of the value of your gifts over that amount.

For example, if during your lifetime you make taxable gifts of money and property valued at $1.2 million, you will owe federal gift tax on $200,000. You might also owe state gift tax, depending on where you live.

However, you can make annual tax-free gifts to as many individuals and nonprofit institutions as you like. As long as the value of the gifts to each individual is less than the annual limit set by Congress, that amount doesn't count against your lifetime tax-free limits.

Gifts to nonprofits are not taxed and don't count against your lifetime limit either.

If you're married, you can give your spouse gifts of any value at anytime, totally tax free, provided he or she is a US citizen. There are limits on spousal gifts when the spouse is not a citizen.

You are not required to report the tax-free gifts on your tax return, but you must report taxable gifts whose value exceeds the annual tax-free limit on IRS Form 709 for the year you make them. The tax becomes due when the cumulative total exceeds $1 million.

However, the law setting the $1 million limit is set to expire at the end of 2010. Unless Congress acts before that date, the lifetime tax-exempt limit will fall back to $675,000.

gift tax

A federal tax that must be paid by a donor.The tax is based on the value of lifetime gifts made to others except in the following situations:

• For the base year of 2004, one can make gifts of up to $11,000 of cash or property per year to each recipient without incurring gift taxes; spouses may give up to $22,000 per year to each recipient. After 2004, there is a cost-of-living adjustment. This is an important aspect of estate planning. See family limited partnership for details.

• Tuition or medical expenses paid directly to the educational or medical institution are not counted as gifts, regardless of the relationship with the student or patient.

• Gifts to spouses are not taxable; there are no dollar limits.

• Gifts to political organizations or charities are not taxable.

For more information, see Publication 950,“Introduction to Estate and Gift Taxes,” available at the IRS Web site,www.irs.gov.

Gift Tax

A graduated federal tax paid by donors on the value of gifts exceeding a specified amount, which is indexed for inflation. For the current amount, see IRS Publication 950 or Form 709.
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The zero balance reflected (1) the absence of any tax liability on the gift taxes, based on the assumption Betty paid them and (2) a marital trust made up of the remaining estate (after expected administration expenses), which passed to Betty and was therefore eligible for the marital deduction.
Because the surviving spouse does not have a right to the entire property, she has the right to require that her donee pay gift taxes on any QTIP property that she transfers as a gift.
The basis is stepped up only to the extent of any gift taxes paid on the gift.
Although a resident alien is generally subject to the same estate and gift taxes rules and rates as a United States citizen, the unlimited marital deduction is unavailable if the surviving spouse is not a United States citizen (in 2010 gifts to foreign spouses are limited to $134,000, see page 505).
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Every taxpayer may transfer up to $10,000 each year to any donee, free of estate and gift taxes; these amounts are not counted against the applicable exclusion amount.
* The IRS approved a new way for grandparents or terminally ill taxpayers with large estates to presently reduce the size of their estates without having to pay gift taxes (PLR 199941013).
The first part of this two-part article, in the January 2001 issue, discussed five top estate planning techniques: use of lifetime gifts, insurance trusts, dynasty trusts, qualified personal residence trusts and grantor retained annuity trusts (GNATs).(19) Part II, below, examines five more strategies for reducing estate and gift taxes.
Following her death, the IRS audited the estate and determined the gifts were not of a present interest but, instead, of a future interest, which meant additional gift taxes were due.
Senator Jon Kyl (R-AZ) is leading the legislative charge to repeal the estate and gift taxes. The senator (and many of his colleagues) contend that death should not be a taxable event.