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Gift Taxes: An estate worth less than $800,000

George SaenzDear Tax Talk,
Can a gift be made to an adult son in the amount of $55,000 in a lump sum without a liability to pay gift tax on the $44,000?
. -- Jewel

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Dear Jewel,
I gather the gift is not the gift of gab. I like these straight-to-the-point questions. A gift from any one person of more than $11,000 to any one person (other than a charitable organization or your spouse) is reportable on Form 709.

A husband and wife can each give $11,000 to a child without reporting the gift, and if the child is married, the same can be given to the spouse by each parent (bringing the total to $44,000). Any amount in excess of the exclusion is subject to gift tax, but since there is a tax credit available, no tax will actually be paid.

The tax credit is equivalent to the tax that would be due on $1,000,000 in reportable gifts. It's worth noting that the gift tax exclusion used to be equivalent to the estate tax exclusion, but as the estate tax exclusion increases in the next few years until its repeal in 2010, the gift tax exclusion will remain at $1,000,000.

Since your total estate is under $1,000,000, there's no immediate concern in using the gift tax exclusion. The amount of exclusion that you currently utilize will reduce the amount available to your estate, but there's no real issue since the estate tax exclusion is increasing and is scheduled to eventually be repealed.

Form 709 is due on April 15 following the year of the gift.

-- Posted: Jan. 23, 2004




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