Question

Course Name: Estate and gifts tax

Assume D, a widower, made no prior taxable gifts. Consider code. 2501, 2502, 2505, and 6019.

In 2012, D makes his first taxable gift in the amount of $500,000. What are the gift tax ramifications of the transfer? what is the amount of the gift tax payable? Must D file a gift tax return?

Answer 1

Ans.: Befor answering the question, let us have brief discussion over the Estate & Gift Tax law and more particularly in reference to year 2012. In this regard, We would like to highlight that ATRA American Tax Relief Act 2012 has affected the laws relating to gift a lot. The said Act gave exemption to Tax payers of $ 5.12 Million. Federal Estate, Gift & GST laws were covered therein.

In view of aforesaid provisions, as the same is relating to year 2012 only and the assess D, without prior taxable gifts has taxable gift in the amount of $ 500000 only, the same is taxfree gifts. No amount will payable as gift tax. However D must file gift tax return as required by law, as law has fixed the overall ceiling in ones life for maximum amount of gifts. To keep a check, how much you have gifted so far, its required to file a gift in annual exclusion.