Actually the IRS rule that you are referring to does not limit the amount of the gift that you can give to an individual in any one year, it just states that any amount over $12,000 each year given to any one individual must be reported to the IRS on Form 709.
The IRS has what is called the Uniform Tax Credit, which allows every individual a lifetime exemption on gifts or estates. Currently for the year 2008 that lifetime exemption amount is set at $2 million. If you give an individual a a gift of $12,000 or more in any one calendar year, the gift must be reported on Form 709 and it counts towards your lifetime exemption amount of $2 million, but no taxes are due unless you eventually exceed the $2 million exclusion amount. This is simply a reporting requirement to account for the gift.
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