TraderStatus.com   __________ Gift Taxes
Home
Order more Information
     
       

Planning, Review & Preparation

Electing Mark-to-Market

Trading through an entity

Trader definitions

Tax rules & latest news

Discussion Board, F.A.Q.,
Futures, Benefit Plans
& other info


Search this site add text to search window

 
  Copyright© 2004 to 2015 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved.
 
2015 changes
Inflation-adjusted for 2015: the annual gift tax exclusion is unchanged at $14,000 ($143,000 for gifts to non-citizen spouses).
Estate tax exemption and gift tax exemption increases to $5,440,000 with a 40% tax tax. (Lifetime gift tax exemption may drop after 2015).
Married couple estate tax exemptions are automatically portable (to the surviving spouse).  This effectively doubles the estate tax exemption to $10,880,000.


2014 changes
Inflation-adjusted for 2014: the annual gift tax exclusion is unchanged at $14,000 ($143,000 for gifts to non-citizen spouses).
Estate tax exemption and gift tax exemption increases to $5,340,000 with a 40% tax tax. (Lifetime gift tax exemption may drop after 2014).
Married couple estate tax exemptions are automatically portable (to the surviving spouse).  This effectively doubles the estate tax exemption to $10,680,000.


2013 changes
Inflation-adjusted for 2013: the annual gift tax exclusion increases to $14,000 ($143,000 for gifts to non-citizen spouses).
Estate tax exemption and gift tax exemption increases to $5,250,000 with a 40% tax tax. (Lifetime gift tax exemption may drop after 2013).
Married couple estate tax exemptions are automatically portable (to the surviving spouse) theoretically without the need to retain a lawyer to form a credit shelter trust. (but only if first spouse dies during 2011 or 2012 or 2013)

You need to file Form 706 for the $5MM portability election:
IRC section 2010(c)(5)(A) Election required. A deceased spousal unused exclusion amount may not be taken into account by a surviving spouse under paragraph (2) unless the executor of the estate of the deceased spouse files an estate tax return on which such amount is computed and makes an election on such return that such amount may be so taken into account. Such election, once made, shall be irrevocable. No election may be made under this subparagraph if such return is filed after the time prescribed by law (including extensions) for filing such return."

In short, the Code says that the election has to be on a timely return.  IRS doesn't have the authority to override the Code.  But was there a trust or a will?  For instance, if there was a trust, and if the trust provides for a bypass trust upon the first death, then maybe the bypass trust eliminates the need to use portability.  Setting up the bypass trust at this point might be a hassle but it might be worthwhile.  


2010 / 2011 / 2012 changes
Estate tax exemption is $5MM with a 35% flat tax (as to be adjusted by Congress during 2012).
Lifetime gift tax exemption jumps from $1MM to match this new $5MM level for gifts made during 2011.  The amount increases to $5,120,000 for 2012.
Lifetime gift tax exemption is schedule to drop to $1MM on 1/1/2013.
Married couple estate tax exemptions are now automatically portable (to the surviving spouse) theoretically without the need to retain a lawyer to form a credit shelter trust. (but only if first spouse dies during 2011 or 2012)

update: Some members of Congress are seeking to change the estate tax exemption to $3.5MM with a 45% flat tax thereafter.


2010 changes
Being aware of what one's tax basis in assets received as a gift or inherited through a decedent's estate has been a problem for years.  Effective with 2010 the IRS has developed a form for pass over of tax basis to the recipients.  In the future, this may develop to cover more assets, including gifts.
New IRS basis reporting form 8939

 

2008 / 2009 changes
Inflation-adjusted figures for 2009: the annual gift tax exclusion increases to $13,000 ($133,000 for gifts to non-citizen spouses). Other changes include: the limit for special use valuation is $1,000,000; recipients of gifts from certain foreign persons must be reported if those gifts exceed $14,139 in the aggregate; the 2% portion for Section 6166 is $1,330,000. The limit on contributions to funeral trusts is repealed for taxable years beginning after August 29, 2008.
 

Generally
An annual exclusion giving program is a simple and powerful method to reduce one's taxable estate upon death. In general, an individual with a net worth over $3,500,000 in 2009 (or a married couple whose combined net worth exceeds $7,000,000) can anticipate that federal estate taxes will be due upon death.

An individual can give $14,000 each year to as many persons as he or she may choose. A donee may be a child, a child's spouse, other family member, or a non-relative. Annual gifts that do not exceed the $14,000 limit are not subject to federal gift tax. and no gift tax return needs to be filed for such transfers. For most states, annual exclusion gifts often do not incur state gift taxation because most states do not impose a gift tax.

Annual exclusion gifts that are made outright to a grandchild or more remote descendant also do not incur generation-skipping transfer (GST) tax. GST tax may otherwise apply when lifetime transfers or transfers upon death are made which skip a generation.

The federal estate tax benefit of a single $14,000 annual exclusion gift can be about $5,600. Any future appreciation in value or the accumulation of future income generated by the property given away is also excluded from the donor's taxable estate.

For residents of the District of Columbia and Maryland, additional savings of about $1,100 apply because these jurisdictions impose their own estate tax in addition to the federal estate tax.

A married couple can effectively double the savings.  This can be accomplished with each  spouse, separately each from their own separate bank account , giving $14,000 each per recipient (for a total of $26,000).  Further, a married couple can use each individual spouse's $14,000 annual limit regardless of which spouse actually owns the transferred money (or property), such as when a jointly held checking account is used to pay out the gifts from. This is accomplished by the timely filing of a federal gift tax return signed by both spouses, making the so-called "split-gift election."   The need for the separate gift tax return can sometimes be avoided simply by avoiding the use of a jointly held checking account for gift giving, and using a separately held bank account from which the gift is made from.

In addition to the $14,000 annual gift tax exclusion, an individual may directly pay medical or educational expenses in an unlimited amount. Such payments are excluded from the federal gift tax (also avoiding gift and estate taxes in most states) and do not reduce the $14,000 annual exclusion.  If the person qualifies as your dependent for medical itemized deductions, you may be entitled to a deduction for the payments as well.

Annual exclusion gifts may be (and frequently are) made in trust. The trust must be specifically designed to ensure that annual gifts made in trust continue to qualify for the $14,000 annual exclusion, otherwise an annual gift tax return is required and your life-time exclusion is depleted.  Annual exclusion gifts also may be made to Educational Section 529 plans to cover college costs for a beneficiary, such as a grandchild. Special feature: optionally, via an election made on a gift tax return, five years of annual exclusion gifts may be made all at one time (i.e., up to $65,000 for an individual donor in 2009, or up to $130,000 for a married donor electing a split-gift election in 2009) to a Section 529 plan.


Quick look-ups:
1981 IRS present interest gift annual donee exclusion: $3,000
1982 IRS present interest gift annual donee exclusion: $10,000
2001 IRS present interest gift annual donee exclusion: $10,000
2002 IRS present interest gift annual donee exclusion: $11,000
2003 IRS present interest gift annual donee exclusion: $11,000
2004 IRS present interest gift annual donee exclusion: $11,000
2005 IRS present interest gift annual donee exclusion: $11,000
2006 IRS present interest gift annual donee exclusion: $12,000
2009 IRS present interest gift annual donee exclusion: $13,000
2010 IRS present interest gift annual donee exclusion: $13,000
2011 IRS present interest gift annual donee exclusion: $13,000
2012 IRS present interest gift annual donee exclusion: $13,000
2013 IRS present interest gift annual donee exclusion: $14,000

The annual donee exclusion is not cumulative. Accordingly, if it is not used during a particular year, the opportunity to use that year's annual donee exclusion vanishes. The use of reciprocal transfers to multiply the benefits of the annual donee exclusion is not permitted.

IRS Code §2503(b) The exclusion is available only when the gift transfer consists of a present interest (i.e., an interest or estate commencing in possession or enjoyment immediately). No exclusion is available for a gift made to a trust for the transferor's descendants or other donees where the value of a particular beneficiary's right to income cannot be determined.



1997 IRS unified credit: $600,000
2001 IRS unified credit: $675,000
2002 IRS unified credit: $1,000,000
2003 IRS unified credit: $1,000,000
2004 IRS unified credit: $1,500,000
2005 IRS unified credit: $1,500,000
2006 IRS unified credit: $2,000,000
2007 IRS unified credit: $2,000,000
2008 IRS unified credit: $2,000,000
2009 IRS unified credit: $3,500,000
2010 IRS unified credit: unlimited (no taxes due for deaths in 2010)
2011 IRS unified credit: $5,000,000
2012 IRS unified credit: $5,120,000
2013 IRS unified credit: $5,250,000
2014 IRS unified credit: $1,000,000 (not verified)



While the federal estate tax is increased in stages and repealed, the gift tax is fixed at $1,000,000 and remains in existence in 2010, the year of the repeal of the federal estate tax.



Lifetime gift exemption f/k/a applicable exclusion amount f/k/a unified credit

1981 IRS lifetime gifts allowed to utilize the unified credit: $???,000
1997 IRS lifetime gifts allowed to utilize the unified credit: $600,000
1998 IRS lifetime gifts allowed to utilize the unified credit: $625,000
1999 IRS lifetime gifts allowed to utilize the unified credit: $650,000
2000 IRS lifetime gifts allowed to utilize the unified credit: $675,000
2001 IRS lifetime gifts allowed to utilize the unified credit: $675,000
2002 IRS lifetime gifts allowed to utilize the unified credit: $1,000,000
2009 IRS lifetime gifts allowed to utilize the unified credit: $1,000,000
2010 IRS lifetime gifts allowed to utilize the unified credit: $1,000,000
2011 IRS lifetime gifts allowed to utilize the unified credit: $5,000,000
2012 IRS lifetime gifts allowed to utilize the unified credit: $5,120,000
2014 IRS lifetime gifts allowed to utilize the unified credit: $5,250,000
2013 IRS lifetime gifts allowed to utilize the unified credit: $1,000,000 (not verified)

 



Nolo Gift Tax FAQ
http://www.nolo.com/lawcenter/ency/article.cfm/ObjectID/DAC2BB31-35E4-43B2-9BDFA70AD3775418/catID/257899BC-C5FA-435D-BA9BCC083F55357E

What are Gift taxes?
http://law.freeadvice.com/tax_law/gift_tax_law/gift_taxes.htm

Findlaw Gift Tax Information
http://cobrands.public.findlaw.com/states_new.html

GiftLaw Calculator (for charitable giving)
http://www.giftlaw.net/glcalc.jsp?WebID=GL2004-0521


 


States That Impose Inheritance / Gift Taxes
Connecticut
(will be phased out by 2005)
Louisiana
(will be phased out by 2004)
New York
(phased out 2000)
Indiana Maryland North Carolina
Iowa Michigan Oklahoma
Kentucky Nebraska Pennsylvania
New Jersey New Hampshire Tennessee

State Tax Central (all states)
http://www.statetaxcentral.com/ask.html


AZ has neither an inheritance tax nor a gift tax.
http://www.revenue.state.az.us/azmove.htm



CT Gift Taxes
http://www.brookfieldct.org/taxfacts.htm

http://www.ct.gov/drs/cwp/view.asp?a=1509&q=271012&drsPNavCtr=%7C41130%7C41285%7C



NH State compared to every other State.
http://www.nheconomy.com/nheconomy/obid/main/index.php?ID=36&ch_table=link5



NY gift tax returns do not have to be filed for gifts made on or after January 1, 2000.
http://tax.custhelp.com/cgi-bin/tax.cfg/php/enduser/std_alp.php?p_sid=cV7-a9Eg&p_lva=&p_li=&p_page=1&p_cat_lvl1=25&p_cat_lvl2=32&p_search_text=&p_new_search=1



NC Gift Taxes
http://www.ces.ncsu.edu/depts/fcs/frm/pubs/fcs2738.html

http://www.dor.state.nc.us/taxes/gift/



TN Gift Taxes
http://www.state.tn.us/revenue/misc/inheritgiftfaq.htm















































Colin M. Cody, CPA, CMA
TraderStatus.com LLC
6004 Main Street
Trumbull, Connecticut 06611-2400

(203) 268-7000


                  MEMBERSHIPS

                
                  Member PCPS                                        
                  The AICPA Alliance for CPA Firms
                  Private Companies Practice Section

                  American Institute of CPAs
                  Connecticut Society of CPAs
                  California Board of Accountancy
                  Institute of Management Accountants


online verifications:
http://peerreview.aicpaservices.org/firmfile/default.asp
http://www.ct.gov/sboa/site/default.asp
http://www.sots.state.ct.us/SBOA/DownloadData.html

https://www.cba.ca.gov/ppns_search
 


[ Home ] [ Webmaster ] [ We Listen ] [ CPA Services ] [ Who We Are ] [ Order the TradersTaxPlan ]

Last updated: January 02, 2015

web counter
visitors since
January 2014
TraderStatus
, TradersTaxPlan, TradersAdvantage,
TraderStatus.com
, TradersTaxPlan.com, TradersAdvantage.com,
DoYourOwnDaytraderTaxes
, DoYourOwnTaxes, DoingYourOwnTaxes,
DoYourOwnDaytraderTaxes.com, DoYourOwnTaxes.com, DoingYourOwnTaxes.com,
DoYourTaxesOnline
, DoYourOwnTaxesOnline
, DoYourTaxesOnline.com, and  DoYourOwnTaxesOnline.com
are trademarks and service marks of Colin M. Cody, CPA and TraderStatus.com, LLC, Trumbull Connecticut
Copyright© 2004 to 2015 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved