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| 2005/12/13-15 [Reference/Tax] UID:40995 Activity:nil |
12/13 Currently the yearly gift tax limit is $11,000 per year, and if it
is over you can deduct it from your lifetime unified gift tax (for
both gift and estate) exemption limit per person, which is $1.5 mil.
This will increase gradually in the next few years thanks to Bush.
http://www.fairmark.com/begin/gifts.htm
http://law.freeadvice.com/tax_law/gift_tax_law/unified_estate_gift_tax.htm
http://www.amerilawyer.com/gift_taxes.htm (old, just change numbers)
According to the URL above, "Because of all of these rules, gift
taxes are rarely required to be paid." Fine. If they're rare
in the first place why did Bush want to increase the limit, and
what % of the Americans actually give more than $1.5 mil as gifts?
\_ political benefits?
\_ Because taxes should always be cut to zero whenever possible,
and instead of balancing the budget you just pressure Asian
countries to keep buying out debt?
countries to keep buying our debt?
\_ asian money is like opium. We have a need for it but it's
bad for us.
\_ Republican Party ideology requires as many tax breaks for the
rich as are politically feasible. -tom |
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| www.fairmark.com/begin/gifts.htm Getting Started Tax Rules for Gifts A quick look at tax rules for gifts. The main rules for gifts between individuals are fairly simple. These gif ts don't produce deductions for the donor or income for the recipient. But if you give more th an the annual exclusion amount ($11,000 for 2004) to one person other th an your spouse in a single year, you'll have some planning concerns an d a reporting obligation. Recipient Doesn't Report Income Gifts you receive aren't considered income. You don't report them on your income tax return in any way. There are a couple of important qualifications on this simple rule: * True gifts. You can't avoid pay ing income tax by calling something a gift when it isn't. For example, a "gift" you receive in exchange for services or some other consideration isn't a gift. If you receive a gift of property that produces in come, you must report any income produced after the gift. For example, if you receive stock as a gift, you must report any dividends paid on that stock after the gift. Sorry, No Deduction Some people hear that they can give an annual amount to their child "tax- free" and wonder if this means they can claim a deduction for such gifts . For now we have to deliver the bad news that there is no deduction for gifts except g ifts to qualifying charities. Basis of Stock Received as a Gift If the gift consists of property other than cash, the basis and holding p eriod of the property will transfer over to the recipient. It's importan t for the recipient to know when the donor acquired the property, the co st of the property, and any other information that would affect the prop erty's basis. Ideally, the recipient of the gift should also receive rec ords that will provide adequate proof of these facts. It's also necessary to know the value of the property at the time of the gift. The donor needs this information to determine whether the gift exceeds the annual exclusion amount and, if so, the amount to report on the gift tax return. The recipient of the gift may also need this infor mation to determine whether a deduction is available if the property is later sold at a loss. Gift Tax Although there's no income tax on gifts, there is such a thing as a gift tax. The person receiving the gift does not have to pay this tax. Most people don't have to worry about this tax because it generally d oesn't apply until you make gifts exceeding annual exclusion amount to o ne person within a single year. And there are other exclusions that ofte n prevent the gift tax from applying. There is an unlimited exclusion fo r gifts to your spouse. The Annual Exclusion The annual exclusion is adjusted for inflation and applies to each person every year. Example: On December 31 you give $10,000 to your son and $10,000 to your son's wife. On January 1 (the next day) you give another $10,000 to yo ur son and another $10,000 to your son's wife. If you made no other gif ts to your son or his wife during these two years, all of the gifts are covered by the annual exclusion. If you're married, your spouse can also make the gifts described in the e xample. You and your spouse each have your own annual exclusion amount, even if you file joint federal income tax returns. Giving More Than the Annual Exclusion Amount If you give more than the annual exclusion amount to one person in a sing le year you'll have to file a gift tax return. But you still won't have to pay gift tax unless you gave given a very large amount. The rules let you give a substantial amount during your lifetime without ever paying a gift tax. You don't use up any of this amount until your gifts to one person in one year exceed the annual exclusion amount. For example, if you make a $14,000 gift in 2004, you have used up only $3,000 of your lifetime lim it. Any amount you use out of your lifetime gift tax exclusion counts aga inst the estate tax exclusion, which is $1,500,000 (for 2004 and 2005). This means that if you use $250,000 of the limit by making gifts during your lifetime, you have reduced by $250,000 the amount that can pass thr ough your estate free of the estate tax. So you shouldn't ignore your li fetime limit even if you feel certain that your lifetime gifts will neve r add up to that amount. It pays to plan your gifts around the annual ex clusion amount and the exclusions for educational and medical expenses w herever possible. |
| law.freeadvice.com/tax_law/gift_tax_law/unified_estate_gift_tax.htm Click He re For Other Legal Topics | What is the unified estate and gift tax credit and how does it reduce my gif t taxes? In 2001, every American received a "credit" against federal Estate and Gi ft Taxes of $220,550 which was equivalent to transferring $675,000 tax f ree to your heirs. In 2010, the esta te tax (but not the gift tax) expires; in 2011, the estate tax again bec omes effective at the 2002 exemption level for deaths occurring in 2011 and thereafter. This credit is referred to as the "unified" credit because federal gift a nd Estate Taxation are integrated into one unified tax system. There is no Estate or Gift Tax on the first $675,000 (or the current "unified" cr edit level) in 2001 of your combined taxable gifts and transfers at deat h You ante up when the sum reaches over $675,000 (or the current "unifi ed" credit amount). For example, suppose you give $25,000 to your sister in 2004 as a gift during your life. You will either pay a Gift Tax on the excess over $11,0 00 or take advantage of the $675,000 unified credit to avoid paying the tax on your gift-giving. Using the l atter option will reduce the amount available to offset the Estate Tax u pon your death. On the other hand, if you report and pay the tax, and la ter die, these previously taxed gifts are added back to your estate, the Estate Tax recalculated, and the amount of Gift Taxes you previously pa id on the excess are credited against any final Estate Tax due. BBBOnLine Reliability Seal FreeAdvice is the leading legal site for consumers and small businesses. It provides general legal information t o help people understand their legal rights in 130+ legal topics, but is not a substitute for personal legal advice from an attorney. |
| www.amerilawyer.com/gift_taxes.htm Contact Us The Official Website of Spiegel & Utrera, P A Spiegel & Utrera, PA is a fully licensed law firm that delivers profess ional legal services at extremely affordable prices. RULES ALLOWING YOU TO AVOID GIFT TAXES The payment of a gift tax is a rarity. Most gifts qualify for the $10,000 annual exclusion or for the mar ital or charitable deduction. Thus, most gift tax planning involves how to legally avoid the payment of any gift tax. The gift must be an outright transfer with no strings attached to qualify for this annual exclusion. Gifts in trust are subject to special rules before they can qualify for t he exclusion. They are retired and have a difficult time spending all of their annual income. Each of them has a considerable amount of excess principal saved. Each of them can make these separate gifts without having to file a gift tax return or pay a gift tax. Gifts in trust to a spouse are subject to complicated rules. This unlimited marital deduction for gift tax purposes is another reaso n that the payment of a gift tax return is so rare. Jim and Beth are married and own most of their property as t enants by the entireties. They have been advised to separate the ownersh ip of some of their assets for estate tax purposes. Each can transfer as much property to the other as he or she wishes, without having to file a gift tax return or pay a gift tax. Most people are aware of the favorable income tax treatment for gifts to charities. Few think about the gift tax consequences when they make annu al donations. Most gifts to charities qualify for the charitable gift ta x deduction and do not result in the payment of a gift tax. Some donors employ trusts to ei ther pay the income or a remainder interest to a charity. These trusts require significant planning and tax knowledge. Most donors rarely make such a large gift in any one year. Because of all of these rules, gift taxes are rarely required to be paid. A Spiegel & Utrera, PA associate is ready to take your call. FREE Search Shelf Corporations (Reddi Corps) A Reddi Corp is a corporation that, for many months or even years, has al ready been established and is recorded with the Secretary of State. |