Answer

Hello XXXX,

First, if and when gift tax is ever due, it is paid by the donor and not by the recipient of the gift. However, under current regulations, each taxpayer is allowed to give gifts in their lifetime of up to $1 million before any gift tax becomes due. This is part of what is called the Uniform Tax Credit Act.

In addition to the $1 million lifetime exemption, each individual is allowed to give annual gifts of up to $13,000 to any number of individuals, and those gifts do not even apply towards the lifetime exemption, nor do they need to be reported. Gifts which exceed the annual exclusion of $13,000 must be reported by the donor by filing Form 709 with the IRS to report the value of the gift. However, no tax is actually due unless that donor has already reached his $1 million lifetime limit. The amount reported then reduces that donor's remaining lifetime balance that he may give in non-taxable gifts.

So in your particular situation, since you have given gifts which exceed the allowed annual exclusion of $13,000 to another individual, you should file Form 709 to report the value of the gifts you have given. However, as long as you have not already used up your allowed $1 million in lifetime gifts, then no tax will be due at this time.

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Thank you Ed and let me know if you have more questions.