1. Money
Julie Garber

2011 Gift Tax Exclusion - Annual Exclusion vs. Lifetime Exemption

By January 19, 2011

Follow me on:

Recently I met with a new client who was really confused about gift taxes. The client mistakenly thought that under the provisions of the new estate and gift tax laws for 2011 and 2012 he can give away $5 million to his daughter over the next two years and won't suffer any tax consequences at all. He also mistakenly thought that Congress was extremely generous in raising the $13,000 annual gift tax exclusion to $5 million for the next two years.

Unfortunately I deal with this confusion often because the federal gift tax has two "exclusions" or "exemptions" associated with it, one that applies on an annual basis and one that applies over the taxpayer's entire lifetime. The former is commonly referred to as the "annual gift tax exclusion" and the latter is commonly referred to as the "lifetime gift tax exemption."

The annual gift tax exclusion is the amount that can be given away by a taxpayer in any one year to any number of people free from any federal gift tax consequences at all. In other words, a lump sum gift or even a series of smaller gifts made to the same person during the course of a year that don't exceed the annual gift tax exclusion aren't really considered gifts at all - they're simply considered "freebies" when it comes to federal gift taxes. For 2011, the annual gift tax exclusion is $13,000.

In contrast, the lifetime gift tax exemption is the amount that can be given away by a taxpayer over his or her entire lifetime to any number of people that will be free from gift taxes but will reduce the amount that can be given away by the taxpayer tax free after death. In other words, the lifetime gift tax exemption is tied directly to the federal estate tax exemption such that if you gift away any amount of your lifetime gift tax exemption, then this amount will be subtracted from your estate tax exemption after you die. For 2011, the lifetime gift tax exemption is $5,000,000, which is the same as the federal estate tax exemption.

Confused? Don't worry, you're not alone. In my experience gift taxes are by far the most misunderstood and complicated of all of the taxes out there. If you're not sure about your gift tax liability, then consult with your estate planning attorney or tax advisor.

Comments
March 24, 2011 at 5:25 pm
(1) Peggy Fallin says:

This is a question.

What happens if the gifter gifts $5M or more during 2011 and 2012 combined, and in 2013 the estate and gift tax exclusion returns to $1M, and his lifetime exlusion is now $1M, but he has already given $5M? Is his entire estate at death now taxable at 55% if he dies in 2013?

Thank you,
Peggy Fallin

March 25, 2011 at 8:37 pm
(2) Julie Ann Garber, Esq. says:

Hi Peggy, that is the $4 million question. Do an internet search for the term “gift tax clawback” (this is the term that estate planners are using for the possibility of the loss of the $4 million swing between the 2011/2012 and 2013 exemptions) and you will see that the general consensus is that those who use their $5 million exemption in 2011 or 2012 will not lose anything if the gift tax exemption goes back down to $1 million in 2013. But, of course, in recent years Congress has been completely unpredictable when it comes to estate and gift taxes, so where we will be in 2013 is anyone’s guess.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

March 26, 2011 at 10:20 am
(3) Steve Reinisch says:

1) If gifter transfers $5 mil now and the exemption is lowered to $1 mil in 2013, even in the event of a clawback for the $4 mil, the gifter is no worse off than if no gift had been made, and there is a good possibility there will not be a clawback.
2) The real upside in making the transfer of $5 mil now is that even in the event of a clawback, the appreciation of assets that are transferred cannot be taxed. So, if gifter transfers $5 mil to an heir now, and that $5 mil earns 5% each in 2011 and 2012, that is $500,000 that has been moved out of the estate and is no longer subject to any Estate Tax.
3) These views are just my understanding of current tax laws and should be confirmed (or rebuked) by your estate planner. I’m just a guy trying to figure things out.

March 28, 2011 at 4:11 pm
(4) julius soter says:

if a taxpayer gifted in excess of $5 million in total in all years through 2010 and was therefore taxed on all in excess of $1 million through those years is the first $4 million given in 2011 tax exempt?

June 22, 2011 at 1:42 pm
(5) Sam says:

Hi I received gift of about $30K from my father-in-law who lives in India. How is the tax calulated on this amount? What can I do to reduce my tax liability on it?

June 23, 2011 at 3:20 pm
(6) Julie Ann Garber, Esq. says:

Hi Sam, is your father-in-law a U.S. resident?

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

July 21, 2011 at 3:59 pm
(7) Joel Younts says:

If I give my son a property worth $120,000.00 in 2011, will this fall under the $5,000,000.00 limit and have no gift tax paid on the amount over $13,00.00?

July 22, 2011 at 12:55 pm
(8) Julie Ann Garber, Esq. says:

Hi Joel, if you give $120,000 to your son in 2011, then $107,000 will be considered a taxable gift that will need to be reported to the IRS on Form 709. You will not owe any gift taxes, however, your $5,000,000 lifetime exemption will be reduced by the $107,000 taxable gift, leaving you with $4,893,000 to still give away.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

July 27, 2011 at 2:16 pm
(9) Sara G says:

Julie Garber is incorrect for 2011. There is a loophole that allows you to transfer up to $5 million without any penalty or tax. There is a form that must be filed when this is done–however, the IRS has not completed it yet. According to my accountant, the form should come out sometime in Sept 2011.

http://www.dailyfinance.com/2011/02/25/temporary-gift-tax-change-could-save-the-wealthy-68-billion/

July 28, 2011 at 8:04 pm
(10) Julie Ann Garber, Esq. says:

Hi Sara, I would love to speak with your accountant so that I can learn about the loophole that you refer to in your comment. The article that you provide a link to does not mention any such loophole.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

July 27, 2011 at 11:37 pm
(11) Lynn says:

If someone previously used their full lifetime gift exemption of $1 million, can they now gift an additional $4 million between 2011 and without incurring gift tax?

July 28, 2011 at 8:06 pm
(12) Julie Ann Garber, Esq. says:

Hi Lynn, yes, a person who has used their entire $1 million lifetime gift tax exemption in prior years will be able to give away an additional $4 million in 2011 and/or 2012.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

August 8, 2011 at 10:12 am
(13) Craig C says:

If I’m receiving a monetary gift from my parents, are they allowed to each write me a check for $13K (total of $26K) without any tax penalties? Is that statement also true for my wife and two children to receive the same gifts for a total of $104K (myself, wife, two children) without any gift tax implications in a given year?

August 8, 2011 at 8:27 pm
(14) Julie Ann Garber, Esq. says:

Hi Craig, based on what you have written, there should be no gift tax consequences.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

August 11, 2011 at 3:57 pm
(15) katrina says:

if a parent gives a grown adult child a lifetime gift do they report it to the IRS and in turn if they give some of that same money to another sibling do they have to fill out any paperwork for IRS that shows they in turn gave part of that original gift to another sibling ?

August 14, 2011 at 5:42 pm
(16) Julie Ann Garber, Esq. says:

Gifts made during the course of the year to the same person who is not your spouse and exceed $13,000 in value must be reported to the IRS on Form 709.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

August 11, 2011 at 4:52 pm
(17) kit lane says:

my father wants to give me a check to deposit in my account for my sister ( who is having some bank problems) as a one time /lifetime gift .. I am to wait the proper number of days for the check to clear then to give her the $$ or write her checks as needed. my question is what if anything do I report to the IRS or do I fill out any forms with the IRS since it is her $$$ that my father is really the one giving her the money?? or how should we do this??

August 14, 2011 at 5:44 pm
(18) Julie Ann Garber, Esq. says:

Your father needs to consult with an estate planning attorney to determine the best course of action in his situation.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

August 18, 2011 at 5:30 pm
(19) Nicole says:

HI. If someone were to be awarded multi millions in a legal settlement and give 5 million or more to a married couple as a gift ( in form of a bank check) how does that work? I believe this type settlement may be tax free as well.
Thanks!

August 18, 2011 at 8:48 pm
(20) Julie Ann Garber, Esq. says:

Hi Nicole, a total of $5 million can be given away to any number of people without incurring a gift tax, but, in turn, the person gifting away the $5 million will reduce their lifetime gift tax exemption and, in turn, their estate tax exemption, to $0. And whether or not a legal settlement is considered taxable income depends on the type of damages awarded.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

August 20, 2011 at 1:45 pm
(21) Peter says:

1st if I understand this correct, any gifts given by an individual in 2012 are certain to still have the $5mil lifetime exemption regardless of congress decisions about the exemption from now on?

and 2nd,

my uncle, who is not a US citizen, doesn’t live in US, doesn’t make any income in US and therefore is not required to file a tax retrun, is planning to make a gift of about 100K to my mother, who is a US citizen and files US tax returns. Is he or my mother going to be taxed somehow? Does the annual or lifetime exemption still apply in this case?

August 22, 2011 at 1:04 pm
(22) Julie Ann Garber, Esq. says:

Hi Peter, as to part one of your question, this is what is anticipated but there are no guarantees.

With regard to part two of your question, the gift giver is the person who would be subject to the U.S. gift tax. Your uncle will need to consult with a tax specialist in his country to determine if he will have any gift tax consequences in his country.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

September 2, 2011 at 2:37 pm
(23) Cullen says:

Hi Julie Ann,

My uncle is the trustee for my grandparents estate. Grandpa died, grandma just moved to a home with failing kidneys and severe dementia. My question is can my uncle as the trustee, make annual gifts on behalf of my grandmother, and if so, can they be made after her death, and if so, how long?

Thank you
Cullen

September 2, 2011 at 4:58 pm
(24) Julie Ann Garber, Esq. says:

Hi Cullen, please accept my condolences on the loss of your grandfather. Whether your uncle can make annual gifts will depend on the laws of the state where your grandmother lives and if she has a valid durable power of attorney that can be used to make gifts. Once your grandmother dies gifts cannot be made.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

September 3, 2011 at 9:46 pm
(25) Chris says:

My In-laws want to give my wife and I $300,000 for a down payment on a house. But now they want to make it a loan because they think that we will get taxed on the “gift.” So if they gift it to us under the lifetime gift amount will we or they get taxed? Or is it smarter to give it to us as a loan for tax reasons? Thanks!

September 3, 2011 at 10:01 pm
(26) Julie Ann Garber, Esq. says:

Hi Chris, it is the person who makes the gift who is subject to gift tax and has to report the gift to the IRS. Whether a gift or a loan will make more sense will depend on many factors, so your in-laws should consult with an estate planning attorney in their state to discuss what will work best in their situation.

Best of luck,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

September 5, 2011 at 2:30 am
(27) Dan says:

Hello Julie Ann and thank you not only for the article but for being so responsive to posted questions!

Just to be absolutely sure I wanted to ask a quick question: My father wants to gift me $50,000 this December. As I understand it, he can simply write me a check for that amount, and $37,000 will be taken off of his eligible estate deductions upon death, but he will pay no tax to the IRS directly, correct? Also, he must report this gift to the IRS via Form 709?

Thanks!

-Dan

September 5, 2011 at 2:20 pm
(28) Julie Ann Garber, Esq. says:

Hi Dan, thank you so much for your kind comments. With regard to your question, if your father does gift you $50,000 in December 2011, then he will need to file IRS Form 709 on or before April 15, 2012, in order to report the taxable gift of $37,000. This $37,000 will in turn reduce the amount of his available estate and gift tax exemption to $4,963,000.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

September 12, 2011 at 4:50 pm
(29) David says:

I am buying a house from my dad. The purchase price is $200,000 and I am taking out a loan for $160,000 to give to him. The other $40,000 is being gifted to me from him. Will he owe any taxes on that, or if he fills out the 709 form does it just subtract the $27,000 from his lifetime gift amount?

September 13, 2011 at 11:38 am
(30) Mark says:

Julie Ann, thanks for all of the insight here. I have a question regarding lifetime gifts vs. loans to an intentionally defective grantor trust. With regard to a wealth transfer technique that has been posed by an attorney I know, what would be the benefit of using one’s lifetime exclusion amount to gift $5 million to an intentionally defective grantor trust versus making a loan of $5 million for a term of 9 years to the trust (subject to the midterm AFR) and preserving the lifetime gift in the grantor’s estate?

September 19, 2011 at 8:55 am
(31) Harry Jaeger says:

I have three children. Am I allowed to give each of them $13,000 a year and still avoid gift taxes?

Can my wife also give each of our three children $13,000 a year?

Thank you.

Harry Jaeger

September 19, 2011 at 2:13 pm
(32) Enrika says:

Hello Julie,

I have opened a CD account in my daughter’s name (she is 8 years old) and put myself as a guardian so I could close an account if I need to. The amount was over the $13,000 annual limit. I did file F-709 in 2010 and filled it out as it was a gift to her. Now I would like to close the account and put all the money in my name. Can I do that and would I have to file F 709 on her behalf (since she is a minor) as a gift from her to me?

Thanks in advance,
Enrika

September 26, 2011 at 7:46 am
(33) Joan & Mark says:

We wrote a check for a gift to our daughter on December 28, 2010 and she didn’t cash the check until January 2011. Is this amount considered a gift for 2010 or 2011?

Thanks!

October 3, 2011 at 10:16 pm
(34) KD says:

If my father were to pay $15,000 for my husband and I to purchase a used van, and he wired the money directly into the auto dealers account, will he owe gift tax on the $2000 over the $13,000 limit? Both mt name and my husbands are on the purchase agreement. So, does this count then as a gift to 2 different people? Is there an easy way for him to get around the gift tax in this instance? I speedy reply would be appreciated! Thank you!!

October 4, 2011 at 12:43 am
(35) Annie Mendoza, (RS) says:

Aloha from Hawaii, Julie!
Your commentary here was the best I found on this subject of gift tax. Your clear answers to the valid questions were extremely helpful!! Wishing you lots of “gifts” for your service.

October 4, 2011 at 2:14 pm
(36) Keith Shanahan says:

I have a question. If someone used up their 1 million dollar gift exemption in 2009 and gifted an additional 6 million out of their estate as well in 2009, and paid the tax, can they now somehow go back, refile their taxes and re-coup the money they paid in excess gift taxes on the 4 million (55%) that they now have as an exemption in 2011? Thank you.

Keith Shanahan,
http://www.PalmBeachTrust.com
info@PalmBeachTrust.com

October 4, 2011 at 2:24 pm
(37) Keith Shanahan says:

Dan,

Maybe you want your Father to gift you $13,000.00 in December 2011 and $13,000.00 on January 1st, 2012 and split it up. If you have a wife, have your Dad gift her $12,000.00 in December and another $12,000.00 on January 1st. This might be the simplest and best way to get the $50,000.00 into your household without him filing any paperwork whatsoever. Check with your attorney. Regards, PalmBeachTrust.com

October 13, 2011 at 1:07 pm
(38) kendall says:

Here’s a new twist!

My Mother died recently and had $252,000 in a joint account with one of my sisters. My mother had told my sister that upon her death give each child 1/6th of the money (6 kids). So when my mother died, my sister had Vanguard send each of us $42,000, which they did, since my sister provided a death cert. and the account was a joint account.

Is my sister now responsble for a gift tax on the money over and above $13,000!!!???

Is the money taxable to me in any way??

October 17, 2011 at 8:31 pm
(39) Al says:

My cousin inherited some money and want’s to give me 3 million dollars, and he has never gifted any money before this. How much of this is taxable?

October 17, 2011 at 11:55 pm
(40) Angus McLeod says:

Will you write about the intentionally defective trust sometime and how one might be used in estate planning? Thanks

October 18, 2011 at 1:08 pm
(41) David says:

Hi Julie,

your article and site has been so helpful. Thank you VERY much. I have a question for you (I think you answered it but I just want to make sure). I am buying my mother’s house and she will be “Gifting” me 20% of the equity in the place which works out to 86k. Since she is married and I am married, I believe they can Gift 52k without being taxed. The additional 34k will be taken out of her 5 million lifetime gift amount and she will have to fill out the 709 form and send it back to the IRS. She won’t have to pay any taxes correct? My wife and I will pay back the 86k over the next 10+ years staying under the 13k limit. Does that work without being illegal and tax free?

Thank you for your time and help.

October 25, 2011 at 10:47 am
(42) Sissy says:

My sister & I have a house we would like to give to my son. The house is only valued around $130,000.00. We of course live in TN – what type of tax and what is the process for doing this.

October 27, 2011 at 10:54 am
(43) Michael Armstrong says:

I have two adult nieces who are up to their necks in student loans. I would like to help them out, which I understand I can do up to $13,000/year (each) (or in 2011, at least) without tax consequences (the lifetime gift limit and estate tax considerations are, sadly, not an issue). The question is, how do I make the transfer to them, and ensure they actually use the money to reduce their loan balances? I don’t think I can pay the institution holding the note(s) directly.

October 28, 2011 at 12:52 pm
(44) Saumil says:

Could I gift less than $13,000 to my family, whose residing and a citizen of India? And still claim the Gift Exemption for 2012?

October 30, 2011 at 7:21 pm
(45) Andrew says:

So if I give away $5 million this year to my family and in 2013 the estate tax limit returns to $1 million dollars do the 4 million dollars extra have to be returned to the orginal owner of the money or otherwise they have to pay taxes? What if the limit goes to $0?

November 15, 2011 at 8:27 am
(46) Steven T says:

Hey Julie,

My mother sent me a monetary gift of 15K, I told her that the allowed gift is 13K. Should I pay her back The 15K and have her void the original gift and re send the appropriate gift.
Thanks

November 15, 2011 at 8:57 pm
(47) Julie Ann Garber, Esq. says:

For answers to all of your gift tax questions, please refer to the following article:

The Best Gift Tax Advice Ever

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

November 22, 2011 at 1:42 pm
(48) Jim says:

Julie, I took your advice and did an internet search for the term “gift tax clawback”.

It seems that no one can say for sure, however the consensus is that there won’t be a clawback.

But how in the world would a clawback work anyway ?

For example assume:

1) A parent makes taxable gifts in 2012 of $5 million, using up her exemption so that no gift taxes are due.

2) The unified exemption amount for estate and gift tax purposes decreases to $1 million in 2013.

3) She dies in 2015 with a taxable estate of virtually nothing having gifted her money to her children in 2012.

Now if there is a clawback with taxes owed from gifts made back in 2012, how could her estate be expected to pay them seeing that it has no money ?

Thank You …

November 26, 2011 at 3:00 pm
(49) Carolyn says:

Do I understand this correctly? The 5,000,000 lifetime gift tax exclusion is in effect for both 2011 and 2012, yet the Estate Tax exclusion is 5,000,000 for 2010 and 2011? What happens to that in 2012? If I gift 2,000,000 in 2012, will it be gift tax free and remain out of my estate in 2013 and after depending on claw back?

November 30, 2011 at 2:27 pm
(50) Jim says:

Under current law:

· The Annual-Gift-Exclusion remains at $13,000 for both 2011 and 2012.

· The Lifetime-Exemption amount:

1) For gifts made AND estates of decedents who die in calendar year 2011 it is $5,000,000.

2) For gifts made AND estates of decedents who die in calendar year 2012 it is $5,120,000.

The rub is …

What will happen if the Lifetime-Exemption is lowered for 2013 and beyond ?

Will there be a “gift tax clawback” ?

And if there is …

Just how in the world would that work for an estate that no longer has the money to pay the taxes ?

The taxes were not owed when the gift was made and the gift tax return filed.

The money is no longer in the estate.

So how in the world could the estate be expected to pay the tax after the fact ?

December 1, 2011 at 3:25 pm
(51) matt says:

If the grandparents are a married couple noting that the annual $13K gift exclusion is $26K/year from grandma/pa (hence they could potentially give 10 of these to 10 children/grandchildren for $260K total tax free/year). Does that make the couple’s estate now $10M in lifetime tax exemption rather than the $5M?

December 8, 2011 at 4:15 pm
(52) Mouth says:

If someone asking about the $5M cap is having problems giving enough, I can help. I am a good receiver, and will not blow it.
What are the laws on daisy-chaining gifts to one person? i.e. Parents give $26k to each of three siblings, and 2 of the three give $26k to the third (assuming they are all married). Which means 1 child ultimately gets $78k.

December 20, 2011 at 10:16 pm
(53) okiyu says:

Is there any reporting requirement if I transfer $ 5 million to my child’s fiduciary account?

December 27, 2011 at 10:52 pm
(54) george says:

Hello. First, thank you for your excellent advice. My questions are based on this: A relative (not me) recently sold some property and wants to give his 4 grown children $100,000 each from the proceeds. Based on what you’ve written:
1. He won’t have to pay any gift tax because each gift is under $5 million. However, he must file a Form 709, because each of the gifts exceeds $13,000.
Is that correct?
2. Must he do a Form 709 for each of the 4 gifts, or only for the total amount given?
3. Do his children have to pay any tax on the $100,000 they each receive?
4. It is better (taxwise) to give them the money now, or to only give a portion annually (i.e. $20,000 to each) , or to leave the money as part of his estate which they would eventually receive?
Thank you again for your advice!

January 4, 2012 at 8:11 pm
(55) Pedro says:

Hi, my wife and I are planning on gifting our home worth about $800k to our 3 adult childrens split 3 ways this year.

1. will we be covered under the lifetime gift exemption?
2. do we need to pay any tax for this gift?
3. do my childrens need to pay tax for this gift?
4. what form do i need to file with the irs?

Thanks.

January 8, 2012 at 3:08 pm
(56) Julie Ann Garber, Esq. says:

Hi Pedro, while your gift will be covered by the lifetime gift tax exemption, I highly recommend that you sit down with an estate planning attorney to discuss why you want to gift your home to your children now and what pros and cons are associated with doing so. This is not something to be done without understanding everything that is involved and what the future consequences will be for both you and your children. If you need assistance finding an estate planning attorney in your area, this article may help:

7 Tips For Finding an Estate Planning Attorney

Best of luck,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

January 17, 2012 at 10:17 am
(57) fred says:

can an irrevocable trust give away money under gift tax rule. or should i say can the trustee of that irrevocable trust.

January 19, 2012 at 11:45 am
(58) Julie Ann Garber, Esq. says:

Hi Fred, the trustee of an irrevocable trust has a fiduciary obligation to the beneficiaries of the trust and so can only make distributions to or for the benefit of the beneficiaries in accordance with the terms of the trust agreement.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

January 19, 2012 at 12:22 pm
(59) Claudine C says:

My father transferred his vacation home to me and my husband in 2011 with a quit claim deed for $1.00. Do I have to claim that on my tax return? My father presently does not have to file a tax return because his only income is social security and he makes under the limit. Will either one of us have to pay taxes?

January 19, 2012 at 1:01 pm
(60) Julie Ann Garber, Esq. says:

Hi Claudine, depending on the value of the vacation home, your father may need to file a gift tax return in order to report a taxable gift. Since the transfer was made in 2011, if a gift tax return is required it will be due on or before April 17, 2012. These articles should help to explain the issues:

What is the Gift Tax and Who Pays It?
What Gifts Are Subject to the Gift Tax?
When is a Gift Tax Return Required to Be Filed?

Depending on where your father lives and the vacation home is located, there may also be state gift tax issues. Your father should consult with an estate planning attorney or accountant who is familiar with the laws of the state where your father lives and where the property is located in order for your father to determine his gift tax liability.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

January 20, 2012 at 11:58 am
(61) Mike G says:

Julie
I think I understand that a 1.5million gift in 2012 will probably not be “clawed back” in 2013, if the 2013 limit is reduced to 1.0million. In that case, have I already “used” that 2013, 1.0 million by virtue of the 2012 gift?
Mike G

January 20, 2012 at 1:00 pm
(62) Julie Ann Garber, Esq. says:

Hi Mike, if you give away $1.5 million in 2012 and in 2013 the lifetime gift tax exemption goes down to $1 million, then you have used up your entire lifetime gift tax and estate tax exemption.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

January 27, 2012 at 4:42 am
(63) Serge says:

I’m a small Inc. business owner. This past Christmas I gave $75000 split equally between my two sisters and my mother. Am I able to right this amount off?

Serge

February 3, 2012 at 6:22 pm
(64) DC says:

Hi Julie

In NYC here. My parents recently transferred their property to me in 2012. I assume that they will need to file the 709 form in their 2012 return due in April of 2013, correct?
I’m under the assumption that the cost basis of the property is still based on the original purchase price, so, if that’s the case, they only dig into about $180K of their lifetime gift exemption, therefore no tax liability on them. I will have to incur any capital gains tax when I decide to sell it base on that $180K cost basis.

Can you confirm that is the correct logic?

Thanks,

February 3, 2012 at 8:42 pm
(65) Julie Ann Garber, Esq. says:

Hi DC, the gift tax return, IRS Form 709, will be due on April 15, 2013, and the value of the gift that will be reported will be equal to the fair market value of the property as of the date of the gift. You will receive your parents’ basis of $180,000 in the property and based on current tax laws will incur capital gains tax on the difference between the basis and sales price.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice and is not a
substitute for legal advice. For legal advice, please consult with an
attorney.

February 4, 2012 at 12:58 am
(66) JoAnn says:

I am 71 and still working part time as an RN, I collect SS Imake $35 per hr- so in wages this yr I reduced my salary so I am not hit so hard with taxes. Lost a lot with stock market mutual fund and helping with grand kids education ( not a lot obviously $5000 yr.

Is it worth it for me to continue working giving if I make $30,000 yr and and other $20,000 in SS? I also have to take my annual distribution as does my husband who is 75 retired and makes about same in SS.

How much am I allowed to put in my 401 K (Contributory account annually) if I continue to work’

Can I contribute $3000 a yr to grand daughters college in her name and use it as a Tax deduction??

Thanks one confused nurse still working after 50 yrs

February 4, 2012 at 10:20 am
(67) Julie Ann Garber, Esq. says:

Hi JoAnn, you need to sit down with a financial planner or accountant in order to determine what will be the right financial and tax decisions for you and your husband.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice and is not a
substitute for legal advice. For legal advice, please consult with an
attorney.

February 4, 2012 at 1:13 am
(68) Li says:

Hi Julie,

I have a peculiar question; if person A gifts person B $13000, and person B then gifts person A $5000, can person A gift $8000 to person B again all in the same year without having to file?

I’m trying to figure out if I borrow money from my family now and pay it back, whether they’ll be able to gift me more money again later in the same year; is the $13000 limit based on net gain or any gain?

Thanks,

Li

February 4, 2012 at 10:30 am
(69) Julie Ann Garber, Esq. says:

Hi Li, a gift is a gift when it is given without any strings attached, while a loan is a loan when it is given with the expectation of the property being returned, usually plus interest.

There is a concept in the tax context called a “step transaction” in which a series of what appear to be separate steps are instead combined into one taxable event.

Since you are in doubt about the taxable consequences of what you are trying to accomplish, you and your family need to sit down with an estate planning attorney or accountant before any transfers take place:

The Best Gift Tax Advice Ever

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice and is not a
substitute for legal advice. For legal advice, please consult with an
attorney.

February 6, 2012 at 7:20 am
(70) Maria says:

I gave my cousin some money to help them with their down payment on a house. I signed a gift letter. But the same month after they got the house,they decided to pay me back. Do I still have to file form 709?

February 6, 2012 at 8:35 pm
(71) Julie Ann Garber, Esq. says:

Hi Maria, what was the amount of the money that you gave to your cousin, and do you have a good paper trail showing the transfer to your cousin and then showing where he/she paid you back?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice and is not a
substitute for legal advice. For legal advice, please consult with an
attorney.

February 8, 2012 at 4:49 pm
(72) Shana says:

Hi Julie, I read through these comments and I couldn’t find one that fit my situation. My mother passed away in March of 2011 and left a life insurance policy for $100,000. My grandmother was the beneficiary and gifted
It all to me. I was told from the financial planner that it was a once in a life time gift tax exemption and we would not have to pay anything on it, just that my grandma Would have to fill out a tax form. Is this true? Is it form 709? I have to file my taxes in the next week and was concerned with being taxed on this. And also in her estate (which is still in probate) has an amount of $35,000. Will this be taxed when probate ends? How does all of this work? Please help!

February 10, 2012 at 12:22 am
(73) Rebecca says:

Hello! Thank you for your great advice!

Let’s say hypothetically my mom, dad, and brother each gift me $5,000 in 2011. For each donor, it’s less than $13,000 so they don’t have to report that. But for me personally, the recipient, the total I receive is $15,000 – would I then have to report this?

February 11, 2012 at 9:59 am
(74) Stew says:

Hi Julie,

Thanks for all your help with our questions. Can the 5 million dollar lifetime gift exemption be used to avoid the New York estate tax if the estate is worth less than 5 million, providing no gifts were given during their lifetime?

Thank you.

February 13, 2012 at 10:49 pm
(75) BRUCE says:

My father is going to gift me a property worth $200K (his first and last gift in his life). I understand that since $200K is less than $5M, thus he does not have to pay any taxes.

But what about me, Will I be paying taxes on the $200K?
Thank you.

February 15, 2012 at 8:09 am
(76) Julie Ann Garber, Esq. says:

Hi Bruce, this article should answer your questions:

What is the Gift Tax and Who Pays It?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice and is not a
substitute for legal advice. For legal advice, please consult with an
attorney.

February 15, 2012 at 8:42 pm
(77) Charlie says:

Hi Julie,

The information you have provided on this topic is extremely valuable and I appreciate it. I do have a quick question…

I read above that if someone gifted in 2011 $113,000 to a non family member US citizen then the $13,000 would be offset by the annual gift tax exclusion. With the 100,000 being used to offset the 5,000,000 gift tax exemption and the $5,000,000 estate tax exemption. I am wondering if I in fact read that correctly? Does the estate tax exemption get reduced by the gift as well?

February 17, 2012 at 8:01 am
(78) Julie Ann Garber, Esq. says:

Hi Charlie, the gift tax and estate tax exclusions are tied together, so that if you give away an amount equal to $5,120,000 while you are alive, then when you die you have $0 of your federal estate tax exemption left.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

February 21, 2012 at 9:16 am
(79) Larry says:

Hi Julie,

Rather than gifting directly to an heir, can an individual gift $5,000,000 to a family trust in order to utilize the current life gift exemption?

Thanks,

Larry

February 21, 2012 at 2:11 pm
(80) Liz says:

Hi Julie,

The 2011 annual gift exclusion of $13,000 is not taxable. Since the Form 709 does not have to be filed every uear, what is the proper way to keep track of all gifts eligible for exclusion?

Thank you for the info.

February 22, 2012 at 1:46 pm
(81) Richard Kim says:

I am married with 2 children. I understand that with annual gift tax exclusion me and my wife together can gift $26,000. to my child A and also $26,000. to child B in 2012. Does the lifte time gift tax work same way? $10M to child A and $10M to child B? It sounds so stupid even if I said so.

February 23, 2012 at 10:28 pm
(82) Ken says:

Hi Julie,

My mother-in-law, who lives in Panama would like to give my wife and I a gift of $26,000.00. Are we, residents of the US, responsible for any taxes on this money. She also would like to gift her granddaughter another $13,000.00.

Thanks,

Ken

February 25, 2012 at 12:32 am
(83) nauman says:

Hi Julie,

How does this apply in the case where a non U.S citizen gifts to a U.S citizen?

My parents (who are not U.S citizens) want to gift a house to me in U.S worth 300k. I am not sure which party pays taxes to the U.S government and/or whether the lifetime exemption you mention applies in this situation.

Thanks!

February 25, 2012 at 6:51 pm
(84) Melissa B says:

Julie,

My 89 yr old mother used $160,000 of her $196,000 cash account (her only asset) to buy a house where my sister and husband will live with her to care for her as she is losing her eyesight. Since it was distant from where she lived my brother in law attended the closing and paid the check. The property is now in his name.

My mother intended for the $160,000 to be divided among her 3 children. My sister and b-in-law now want to buy out my brother and me since they intend to live there after my mother dies, so are taking out a mortgage for 2/3 of $160,000 to pay us. When he gets the check for $106,000+ he says he’ll give it to my mother who will then write checks of $53,000+ each to my brother and me.

We are getting mixed messages from everyone about her, or our, tax liabilities. It is as if my brother in law was originally gifted $160,000 last year, and now my brother and I are gifted $53,000 this year.

Please help, we are very confused!

February 28, 2012 at 7:43 pm
(85) Jennifer says:

My mother passed in October, 2012. She had an estate planner make a very nice binder, she set everyuthing up in a trust (home, checking account), and the estate people handed it over, and told us to get lawyers.
As her Arizona State retirement comes in, we have to decide how to accept the money and split it four ways. All four of us cannot find anything that states how much we will get taxed on this inheritance. The approximate amount is 171 thousand, split four ways. The estate palnners told us to get an accountant. I was in the midst of filing bankruptcy and now we all have questions!
Where in Arizona can I find inheritance tax information? Is there any way to keep my inheritance safe from creditors?
Death and money makes for a lot of questions.
Thank you.

March 1, 2012 at 10:46 am
(86) Era says:

I gifted my son in 2010 and he now wants to pay me back. Do I have to pay tax?

March 5, 2012 at 7:13 pm
(87) Evelyn Rivera says:

If I gift my son $7500 and my husband gifts the same son $7500, do we have to fill out Form 709? If so, what section? This form is extremely confusing! Thanks for your help!

March 11, 2012 at 12:28 pm
(88) Sam says:

Hi Julie,
Thanks in advance for your help.
I want to buy a house in Canada jointly with my son. My intention is to gift him 50% of the property immediately and he receives other 50% upon my death. Both of us are dual citizens of USA and Canada, however, we live in America. My question is how do I report on form 709? that I gave cash and the money was used for buying 50% of a house or I gave 50% of a house located in Canada.

March 19, 2012 at 12:04 pm
(89) Teo Graca says:

It looks like a person could received more than $13,000 in gifts from multiple people and not be liable for tax.

Is this correct?

Example: 100 people each give Sam a $13,000 gift. Sam receives 1,300,000 in 2011. My understanding is that Sam owes no tax, even if these people aren’t related to Sam.

Can businesses give gifts to individuals?

Example: A business provides 100 people a $13,000 gift each. The recipients are not taxed. The business however does not get a deduction on this $1,300,000 in gifts.

March 21, 2012 at 8:58 am
(90) Kevin says:

If I’m given a gift of $13,000 per year. Where would I put that on my taxes to show proof of income?

March 22, 2012 at 3:31 am
(91) Cherish says:

So my mom added me and my husband to her bank account as joint holders of the account in 2011 with a total of $60,000 in the account. She has given us full access to that account including using it for a down payment on a home would she still have to claim it as gift tax, and or would me and my husband have to pay any taxes on that. Or since it’s a joint account now would that mean we don’t have to claim anything for all members of joint account. Thank You

March 22, 2012 at 12:08 pm
(92) Mark D Olson says:

Hi Julie,
I have a friend of mine who is an only child, her mom is 93 years old, in an assissted living center suffering with dementia. Her only daughter is now the power of attorney of moms estate. The question is, mom has a little over 2 million in her estate, can the daughter take advantage of the lifetime 5 million exemption, by transfering 1,200,000 out of her (moms) estate now, so that when she passes away, mom’s estate won’t exceed the 1 million exemption in the state that she lives in? What form needs to be filed with the IRS?

April 6, 2012 at 10:45 pm
(93) NW says:

Hi Julie,

Hi, can you please confirm my understand of what you are saying in your article? The annual gift tax exclusion of 13K did not change, it is only the lifetime gift tax exemption that has changed to 5 million.

So, if I gave a friend $513,000 dollars as a gift this year, 13 thousand would be excluded and $500,000 would be deducted from my 5 million lifetime exemption.

I would have to report $500,000 to the IRS on Form 709, however neither I or my friend would have to pay any tax on that amount.
Thank you for clarifying my understanding.

NW

April 12, 2012 at 12:40 am
(94) Kate says:

I want to give a friend $500,000. I understand that as the donor I will pay the federal and state taxes. Are there any implications on my friend in regard to capital gains?

Thank you.

May 4, 2012 at 12:15 pm
(95) Kurt says:

My wife is a non-US citizen living in the US with a green card.

If I die and leave her my estate, is there a $5 million gift tax exclusion for a non-US citizen?

If not, can we get around this limitation by simply making sure that all assets are in jointly held accounts?

PS – this rule is really a huge penalty for people from countries that do not permit citizenship in another country without giving up the citizenship of their original country….

May 6, 2012 at 11:50 am
(96) Julie Ann Garber, Esq. says:

Hi Kurt, each U.S. citizen has the $5.12 million gift/estate tax exemption available which can be used to make gifts during life or pass on property after death to anyone. In addition, in 2012 each U.S. citizen spouse can gift up to $139,000 to a non-citizen spouse gift tax free. You need to be careful of titling assets in joint names with your non-citizen wife because you could inadvertently be making a taxable gift. You should really sit down with an estate planning attorney who will be able to take a look at your specific situation and advise you how you and your wife can minimize gift and estate taxes.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

May 8, 2012 at 8:31 pm
(97) Jack P. says:

I have a friend that lives in another country. He is wanting to gift me a large sum of money. (over the gift exemption limit) He is not a US citizen and does not work or pay taxes in this country. 1) Does he have any tax liability to the U.S?
2) Will I have any tax liability?
I understand that he may have a tax liability in his country but my main question is will he or I need to file any sort of tax forms or pay any taxes in the U.S.?

May 9, 2012 at 8:21 am
(98) Julie Ann Garber, Esq. says:

Hi Jack, you will need to consult with an accountant or tax attorney in both your friend’s country of residence and your state of residence.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

May 15, 2012 at 6:09 am
(99) Collin says:

Wow Julie, This is quite the onslaught of questions for you!
Your quite the trooper keeping up with all this…

Can a father of four receive a 13,000 gift from each child without needed to report and pay taxes on that money?

Is there a limit on non taxable gifts that one person can receive if they are coming from different sources?

Thanks

May 15, 2012 at 10:10 pm
(100) Ken says:

Dear Julie,

I am in the process of buying a new home and plan to use the proceeds from the sale of my current home for the down payment. Because it is difficult to time the transactions, my mother has offered to help by allowing me to use money ($150k) from a joint account in both our names as long as I refund the joint account as soon as I sell my current home. In otherwords this is not a gift, but rather a bridge loan of sorts.

Since I will be refunding the money from the joint account within a month or less, does this count as a taxable gift and require my mom to pay gift tax? Do we need to draft a contract between us that stipulates this as a loan?

Thank you for your help!

Ken

May 16, 2012 at 2:18 pm
(101) Collin says:

Hello Julie,

Is there a limit on the number of non-taxable gifts that one person can receive if the gifts are coming from different sources?

June 3, 2012 at 4:24 pm
(102) J. T. says:

My 92 year old father died last month. He had just sold his house a couple of weeks before his death in order to pay for long term care. He has not filed with IRS for several years. His only income was Social Security. The $100,000 from sell of the house is sitting in his bank account currently. My sister, brother and I are thinking we can just split the money 3 ways and be done with it. However, does Dad owe IRS based on sell of his home? Will we 3 siblings owe on the money when we divide it?

Thanks much,

June 5, 2012 at 8:28 am
(103) Julie Ann Garber, Esq. says:

Hello J.T., please accept my condolences on your loss. Since your father has not filed federal tax returns for the past several years, you and your siblings need to consult with an accountant in your father’s state of residence before you do anything with the sale proceeds in order to determine if there is any potential income tax liability at the federal or state level.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

June 4, 2012 at 9:10 am
(104) luigi trombetta says:

Great info. and its appreciated. I live in NYC my mom is the owner of a single family home worth apxx. 350.000. she is 78 yrs. and retired with minimal ss income of appx 900. per month. if she transfers the home over to us 5 adult children will she have to pay a gift tax? and will we have to pay any gift taxes.

June 5, 2012 at 8:34 am
(105) Julie Ann Garber, Esq. says:

Hello Luigi, your mother needs to consult with an estate planning attorney in her area in order to understand all of the pros and cons of transferring her home to you and your siblings, which will include a discussion about all of the income, gift and real estate tax consequences of doing so. Only after discussing the pros and cons of the transaction with a professional will your mother be able to make an informed decision.

These articles may help:

The Best Gift Tax Advice Ever
How to Find an Estate Planning Attorney

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

June 7, 2012 at 8:35 am
(106) Luigi says:

Thank you julie for the response it is so appreciated, and although I realize that with your general answer you are trying to protect the interests of my mother, and I appreciate that too, however, for the sake of information only and I know that you are not providing legal advice nor would I consider it such, I was simply asking if by transferring the home over to us by a quit claim deed, will my mom have to pay any gift tax, or would we? Generally speaking.
Thanks again, for the blog

June 7, 2012 at 12:52 pm
(107) Julie Ann Garber, Esq. says:

Hi Luigi, these articles should help to explain the gift tax consequences of a quit claim deed:

What is the Gift Tax and Who Pays It?
When is a Gift Tax Return Required to be Filed?
How is the Gift Tax Calculated?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

June 28, 2012 at 1:15 am
(108) Murthy says:

Hi, I am an Indian citizen and my children reside in USA. Questions on gift tax are
1. How much gift can I give to each of my children and their spouses in an year? Can I give $ 13000 to each of them without attracting gift tax?
2. If my wife also wants to give similar gifts, whether she can give each of our children and their spouses upto US $ 13000 per annum? If she does it, will it attract gift tax in the hands of the recipients?
3. In India, gifts are exempted from tax and hence we do not pay any tax on our gifts. Will it in any way impact our gifts to the children who are in US?
Our children and their spouses continue to be Indian citizens- while one family is permanent residents, the other one is on H1B visa.
Thanks and regards Murthy

July 8, 2012 at 12:56 pm
(109) Julie Ann Garber, Esq. says:

Hi Murthy, this article explains the IRS reporting requirements for foreign gifts received by U.S. citizens and resident aliens:

Do You Have to Report Gifts or Inheritances Received from Foreigners?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

June 29, 2012 at 8:01 pm
(110) Pat says:

If less than the full $5 million, but more than $1 million, is gifted in 2012, and the lifetime exemption then goes down to $1 million in 2013, are the previous lifetime gifts then “frozen” so that any gifts made in 2013 or later would be considered in excess of the current lifetime exemption and would be subject to gift tax? I’m thinking yes, but wanted to be sure.

July 8, 2012 at 1:02 pm
(111) Julie Ann Garber, Esq. says:

Hi Pat, the situation you describe is referred to as a tax “clawback.” These articles discuss the clawback possibility:

5 Myths About the New Estate and Gift Tax Laws
Using Your Lifetime Gift Tax Exemption in 2012 – Proceed With Caution
Year End Estate Planning Tip #3 – Consider Using Some or All of Your Lifetime Gift Tax Exemption

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

July 13, 2012 at 6:10 pm
(112) Thomas says:

Hello

My wife and I are purchasing a home. My inlaws are sending us $50,000 for part of our down payment. They’re Australian Citizens and we are US citizens. The funds will be sent from Australia to the US via wire transfer.

How will this $50,000 dollar gift affect my wife and I, tax wise? Do we have to pay tax on the money?

July 14, 2012 at 10:42 pm
(113) Julie Ann Garber, Esq. says:

Hi Thomas, the following article addresses your questions:

Do You Have to Report Gifts or Inheritances Received from Foreigners?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

July 22, 2012 at 1:57 pm
(114) Melissa says:

Hi,
I haven’t found a exact answer on if I am helping someone out (not related to me) and they pay me weekly by a check that I deposit into my account (I do not claim this on my taxes) as long as it is under $13,000 I will be okay? They are not adding that amount to their taxes either.
Thanks for any help

August 3, 2012 at 9:48 pm
(115) shannon says:

hi there! I inherited 113,000.00 from my father- how much should I set aside to pay taxes?

September 7, 2012 at 11:30 am
(116) Bianca says:

Hi Julie, thank you for your advice. I have a question you might be able to help with:

If my parents, non-US residents gift me $90,000, does that count toward my LIFETIME limit as an American citizen?
Would it limit my and my husband’s ability to “gift” money in the future to our children? It is my understanding that whether you are giving or receiving money it counts towards your limit, is this correct? I want to know if I receive funds from a non resident alien, if it counts towards that limit.

September 8, 2012 at 6:39 pm
(117) Julie Ann Garber, Esq. says:

Hi Bianca, these articles should answer your questions:

What is the Gift Tax and Who Pays It?
When is a Gift Tax Return Required to Be Filed?
Do You Have to Report Gifts or Inheritances Received from Foreigners?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

September 27, 2012 at 5:46 am
(118) Jackie says:

Dear Julie Ann. We are resident in the UK. My US citizen husband wishes to use the current $5m exemption (it won’t be that much but it will be significantly above the annual $139K) to gift me (non citizen spouse) property assets in the UK, currently jointly owned.
1) Can he do this (gift me more than the annual exemption this year)?
2) What documentation/tax forms/reporting/record keeping would be needed?
Thank you

October 6, 2012 at 4:17 pm
(119) Kevorn says:

I had a home that I owed $500,000 own and a dear friend paid the balance of the mortgage off for me as a gift. He also paid my 2nd mortgage off which was $178,000. What is my gift tax responsibility? What is his? And finally Is it possible to set up a situation in which me, my wife and my four kids can receive a $26,000 gift each per year from that couple until there is no gift tax due for him?

October 8, 2012 at 5:01 pm
(120) Kiim says:

If I gift property to my child and state that the date of transfer is 7/1/11, but do not record the transfer with the assessor until 8/1/12 (recording documents clearly state 7/1/11, but everything is signed 2012), do I have a 2011 or 2012 gift for gift tax reporting purposes?

Thanks!

October 9, 2012 at 2:52 pm
(121) Kiim says:

Property was gifted on 7/1/11, but not recorded with the assessor’s office until 8/28/12 (signed by property owners on 8/16/12). All of these dates are listed in the appropriate spots on the form filed with the assessor. What is the date of the gift for gift tax purposes? I’m trying to determine if I have a couple of days to file the gift tax returns (personal return is extended) or if I have until next year.

Thanks!

October 12, 2012 at 6:07 pm
(122) Jen says:

My father gifted $1M to my two sisters and I this year (2012). In order to take the lifetime gift tax exemption what needs to be done? Talked to two tax accountants that seem to be clueless. Is there a form that needs to be filled out when my father does his taxes? The gift was given to us in the form of stocks.

October 13, 2012 at 1:40 pm
(123) Julie Ann Garber, Esq. says:

Hi Jen, these articles should help to answer your questions:

What is the Gift Tax and Who Pays It?
What Gifts Are Subject to the Gift Tax?
How is the Gift Tax Calculated?
When is a Gift Tax Return, IRS Form 709, Required to Be Filed?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

November 19, 2012 at 12:32 am
(124) Steve says:

If I gift my Son a 500,000 house and want to take the gift out of my life time gift exclusion, then my son sells the house, is his basis the value of the house upon receipt or what my basis was before I gifted it to him?

November 19, 2012 at 8:07 pm
(125) Julie Ann Garber, Esq. says:

Hi Steve, please refer to this article for the answer to your question:

What is the Gift Tax and Who Pays It?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

December 15, 2012 at 11:04 am
(126) jay says:

I have a question about the yearly 13,000 gift tax exemption…..

If one of your parents pass away can that parent still take advantage of the 13,000 amount that same year? Or must the money be given while the parent is still alive?

i.e. right after a parent dies can the other parent take full advantage of the gift tax exemption and give a gift with a check of 26,000 if the account is in both parents names?

December 15, 2012 at 11:46 am
(127) Julie Ann Garber, Esq. says:

Hello Jay, I think that you know the answer to your own question – how could a deceased person possibly make a gift?

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

January 25, 2013 at 10:57 am
(128) Melissa says:

My father deeded me 5.44 acres as a gift in 2002 with the verbal agreement when he turned 65 I would pay him $12,000. He has now charged me $30000. I took it out of my 401k to pay him (and yes, I know how this must seem to you a part of me is in shock but another part is not that he did this) My question is can I count the $30,000 on my taxes for some write off ? Also, I am now selling my home and the land it sits on. Because it shows on the deed as a gift will I be penalized when I sell it?

February 11, 2013 at 12:55 pm
(129) Arthur says:

My father is a naturalized US Citizen that had assets prior to becoming a US Citizen. He now wants to assist me with a downpayment on a real estate purchase in the US and wants to use his foreign funds to supply this gift of $150,000. I was told by a CPA that given that he had this asset prior to becoming a US Citizen, it would not be subject to the gift tax and that I would only have to file form 3520 on my return. He also said there would be no tax assessed to me or my dad. Is this true?

February 23, 2013 at 4:08 pm
(130) tom says:

My friend sends home to the Phillapnies 3000 a month to non us citizens outside the US. Can he claim any as gift?

April 24, 2013 at 10:14 am
(131) annette says:

My client made gifts in 2012 to a Trust for the $5.12 Million dollars but when the securities were actually transferred, actually $5.3 was gifted. What can I do now? We extended the gift tax return with the federal thinking no tax due. Can the amount “overgifted” be returned or do I just need to file a 709 asap? thank you!

June 24, 2013 at 10:05 am
(132) Susan says:

Hi!

I am married to a non U.S. citizen and we do not live in the States any longer ( he also has no greencard). I am a U.S citizen. He gifted me $40,000 dollars to pay for my private student loans. He deposited the money into my bank account, in the States, and I paid my loans the next day with the entire amount. Do I need to file anything for this? I know the bank reports cash deposits of more than 10,000 to the federal government. Any help on this matter would be great.

Best,
Susan

July 23, 2013 at 2:17 pm
(133) Betty says:

I gift my brother 14,000 and then gift a friend 14,000. My friend then gifts my brother 14,000. Is the IRS going to disallow this for the annual exclusion or is the only problem whether I can trust my friend?
Thanks for your input and responses to everyone!

July 23, 2013 at 7:41 pm
(134) Julie Ann Garber, Esq. says:

Hi Betty, there cannot be any agreement (written or implied) between you and your friend that the friend will turn around and give your “gift” to your brother, otherwise it would not be considered an actual “gift” to your friend but a sham designed to thwart the gift tax rules.

Best regards,

Julie Ann Garber, Esq.
Attorney, The Andersen Firm, A Professional Corporation
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

October 22, 2013 at 11:31 am
(135) Tiffany says:

Hi Julie,

What happens when my parents would like to give me $300,000 in 2013? The total amount that they had given/will give me (in the past, present and future) will not exceed the lifetime exemption ($5M). Will they have to pay any gift tax at all in 2013 or in the future?

October 23, 2013 at 12:36 pm
(136) Julie Ann Garber, Esq. says:

Hi Tiffany, these articles should held to explain the taxable nature of the $300,000 gift in 2013:

What is the Gift Tax and Who Pays It?
What Gifts Are Subject to the Gift Tax?
How is the Gift Tax Calculated?
When is a Gift Tax Return Required to be Filed for Gifts Made in 2013?

Best regards,

Julie Ann Garber, Esq.
Attorney, The Andersen Firm, A Professional Corporation
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

November 21, 2013 at 7:10 am
(137) Mike says:

Hi Julie,

I’m buying a house very soon and my parents want to help me out to have a bigger down payment to avoid the PMI..

They are going to write me a check from their Home Equity Line, with an amount of $40,000. It will be a loan to me, meaning I will make monthly payments to them to repay their loan in the next 6 years.

Will this be taxable?

Thanks.

November 24, 2013 at 8:44 am
(138) Julie Ann Garber, Esq. says:

Hi Mike, if the $40,000 is characterized as a loan, then income taxes will be owed by your parents in the amount of interest that they collect on the loan. If they do not collect interest at the minimum rate, then the $40,000 will be considered a gift that will need to be reported to the IRS on Form 709: When is a Gift Tax Return Required to Be Filed for Gifts Made in 2013?

Best regards,

Julie Ann Garber, Esq.
Attorney, The Andersen Firm, A Professional Corporation
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

December 4, 2013 at 9:03 pm
(139) Derek says:

Hi Julie,

My grandma died earlier this year. In 2012 she gave $60,000 to a college savings plan for my younger brother, but elected to treat it as a set of contributions over five years to fully utilize the annual gift exclusion amounts.
Since this gift was made within the three years before her death, I understand that gifts like this get “pulled back” into her estate for tax purposes. I’m wondering if the annual exclusion amounts that have already been used alter the value that is pulled back.
So, will $60,000 be pulled back or just the amount remaining after the exclusions already taken?

Thanks.

January 7, 2014 at 1:32 pm
(140) Tom says:

Hi Julie – thank you for taking the time to respond to all the comments. I am a citizen of India in the US on an H1-B work visa. My father is planning to give me a gift of approximately USD 1,110,000 as a down payment towards a house in the US. My dad is also a citizen of India and does not live in the US. Other than “reporting” the gifts on form 3520 do I have any tax liability? My wife is a US citizen but I am not sure if that is relevant. The funds will be wired into my account.

Also since my dad and I are both not US citizens I am assuming none of these gifts count towards any allowances.

Thank you,
Tom!

January 29, 2014 at 5:05 pm
(141) M says:

If you have give the maximum lifetimes gift, is any real estate you leave to others taxed still 55% when they receive it or when they sell it?

February 20, 2014 at 2:15 pm
(142) Bettyvn says:

Hi Julie,

I just put 20K in 529 for my son in 2013. Now I figured out that I have to file form 709 with 2 choices to avoid gift tax, splitting into 5 years or using lifetime gift tax exemption.

So my questions are:
1) if I split into 5 years , which means 4K/ years, then I still can give 10K/ yr for the next 4 years, without filing 709 (for the next 4 yrs, assuming that the annual exempt still be 14K) ?

2) I haven’t used any of my lifetime gift tax exempt yet, and if I chose to use my lifetime exemption, how can I indicate that (no where on the form 709 to indicate so). And if to calculate the tax, it will be tax due amount. So, I just send in the form 709 with tax due, but don’t have to send in money to pay, as IRS will take it as I use my lifetime gift tax exempt?

Thank you very much for your help.

February 20, 2014 at 7:36 pm
(143) Julie Ann Garber, Esq. says:

Hi Betty, you will need to consult with an estate planning attorney or accountant in order to determine what will work the best in your situation: Best Gift Tax Advice Ever.

Best regards,

Julie Ann Garber, Esq.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal advice, please consult with an attorney. For tax advice, please consult with an accountant or tax attorney.

March 5, 2014 at 2:49 pm
(144) Carol says:

Julie, I have recently taken over POA for my Mother. In examining my Mother’s finances, it is evident there was misappropriations of the majority of my Mother’s assets by her previous POA. During the reign of her previous POA, the POA sold my Mother’s house to her (the POA) daughter. The POA signed all the paperwork via the POA. I have been able to get the paperwork from the sale of the house from the Title/Abstract company. There is a $5000.00 gift of equity give to the seller. The letter for the gift of equity was signed by the POA and not by my Mother. Is that legal? (My Mother was unaware that she was giving a gift of equity or that she was paying all the closing costs)

Thank you

March 5, 2014 at 9:54 pm
(145) Julie Ann Garber, Esq. says:

Hi Carol, whether the actions of the prior attorney in fact were legitimate will depend on several factors, including the actual provisions contained in the Power of Attorney document and applicable state law. I recommend that you consult with an attorney who is familiar with the Power of Attorney laws of the state where your mother lives in order to determine the validity of the prior attorney in fact’s actions.

Best regards,

Julie Ann Garber, Esq.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal advice, please consult with an attorney. For tax advice, please consult with an accountant or tax attorney.

March 12, 2014 at 5:30 pm
(146) Anvi says:

HI
What happens if my parents gift me less that 100,000$ towards my down payment for a house?
Do I have to pay taxes for that? OR do I have to file form 3520?
thanks

Leave a Comment

Line and paragraph breaks are automatic. Some HTML allowed: <a href="" title="">, <b>, <i>, <strike>

©2014 About.com. All rights reserved.