Question

Describe some of the transfers and deductions that are excluded from the definition of a taxable transfer for gift tax purposes?

Answer 1

Some of the transfers and dedications which are excluded from the definition of taxable income for gift tax purposes are provided below:-

1) Taxpayers can transfer substantial amounts free of gift taxes to their children and others each year through the use of the annual federal gift tax exclusion. The amount is adjusted for inflation annually. This exclusion covers gifts that you make to each person each year. However the amount should not exceed the inflation adjusted amount of the year

2) In case of married couples, By splitting their gifts, married couples can give up to twice this amount tax-free. Each giver and recipient pair has its own annual exclusion; a giver can give to any number of recipients and the exclusion is not affected by other gifts that recipient may have received from other givers.

3)gifts in excess of the annual exclusion may still be tax-free up to the lifetime estate basic exclusion amount. For estates over that amount, however, such gifts might result in an increase in estate taxes. Taxpayers that expect to have a taxable estate may sometimes prefer to pay gift taxes as they occur, rather than saving them up as part of the estate.