Once the total value of gifts made to a nonspouse family member or friend reache
ID: 2357936 • Letter: O
Question
Once the total value of gifts made to a nonspouse family member or friend reaches $13,000, or $139,000 for gifts made to a noncitizen spouse, in any given year, any additional gifts made in the same year to the same person will become taxable for federal gift tax purposes. For example, if a father makes a one time gift of $113,000 to his son for the purchase of a home, then $13,000 of the gift is free and clear of the federal gift tax and the remaining $100,000 is a taxable gift. Or, if the father gifts his son $10,000 in January and then an additional $100,000 in June of the same year, then the first $13,000 is free and clear of the federal gift tax and $97,000 is a taxable gift. Using the example above of the gift of $113,000 to the son, while the first $13,000 is free and clear of any federal gift tax due to the annual exclusion from gift taxes, the next $100,000 is a taxable gift made by the father to the son. But instead of paying a gift tax the father will reduce his lifetime gift tax exemption by $100,000. Thus, in 2012 the father will be able to give away another $5,020,000 before any federal gift tax will be due: $5,120,000 lifetime gift tax exemption - $100,000 taxable gift = $5,020,000 lifetime gift tax exemption remaining Once the entire $5,120,000 lifetime gift tax exemption is used up, a federal gift tax will be owed. As mentioned above, the current gift tax rates start at 18% and max out at 35%.Explanation / Answer
Once the total value of gifts made to a nonspouse family member or friend reaches $13,000, or $139,000 for gifts made to a noncitizen spouse, in any given year, any additional gifts made in the same year to the same person will become taxable for federal gift tax purposes. For example, if a father makes a one time gift of $113,000 to his son for the purchase of a home, then $13,000 of the gift is free and clear of the federal gift tax and the remaining $100,000 is a taxable gift. Or, if the father gifts his son $10,000 in January and then an additional $100,000 in June of the same year, then the first $13,000 is free and clear of the federal gift tax and $97,000 is a taxable gift. Using the example above of the gift of $113,000 to the son, while the first $13,000 is free and clear of any federal gift tax due to the annual exclusion from gift taxes, the next $100,000 is a taxable gift made by the father to the son. But instead of paying a gift tax the father will reduce his lifetime gift tax exemption by $100,000. Thus, in 2012 the father will be able to give away another $5,020,000 before any federal gift tax will be due: $5,120,000 lifetime gift tax exemption - $100,000 taxable gift = $5,020,000 lifetime gift tax exemption remaining Once the entire $5,120,000 lifetime gift tax exemption is used up, a federal gift tax will be owed. As mentioned above, the current gift tax rates start at 18% and max out at 35%.
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