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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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How much money can be gifted to me before the doner has to

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How much money can be gifted to me before the doner has to pay a big penilty?
If the bush tax cut go away does this change the amout that is gifted before the penilit/
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You can receive up to 13,000 dollars annually from one person before that person would need to file a gift tax return. If the gifts exceed the 13,000 dollar threshold per recipient,, the giver would either need to pay gift tax or claim a portion of their unified tax credit to avoid paying the gift tax. The unified credit is applicable to the gift and estate tax regimes. For 2012, there is a 5,120,000 dollar estate tax exclusion, which amounts to a 1,772,800 dollar lifetime unified credit for 2012.

If the Bush tax cuts for the Estate tax expire at the end of the year, the lifetime estate and gift tax exclusion of 5,120,000 drops to 1,000,000. However, and individual will still be able to give 13,000 dollars a year without filing a gift tax return.

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Customer: replied 4 years ago.


I not sure I understand. What you are telling me is that if the doner gives ever yr. then $13,000 is the limit. But the doner could do a one time deal of $5,120,000. is that correct?

The giver can give 13,000 a year, without reporting anything to the IRS. If they exceed 13,000 dollars, they need to file a gift tax return. On the gift tax return, the giver can pay the gift tax or use a portion of their lifetime gift and estate exclusion of 5,120,000 dollars for 2012.

If the giver has an estate worth a million dollars or more, any used up estate exclusion could cost estate taxes when the giver dies. This issue can make paying the gift tax on years that a gift return is filed a good idea.

Let me know if I can do anything else.
Customer: replied 4 years ago.

So if they gift $5,000,000 and file the gift tax return and use the lifetime gift estate exclusion then not taxs are owed untill the doner dies.


how much is owed when the doner dies?

If they give a 5,000,000 dollar gift by 12/31/2012, there would be no gift tax on the gift.

If there is anything left in the giver's estate (and Congress doesn't do anything to keep the exemption at 5,000,000 or higher) when they die the estate will owe estate tax on the value of their entire estate. If the estate value when the giver dies is under 1,250,000, the estate will owe 41% of the value of the entire estate.

By giving 5,000,000 by the end of this year, your generous friend ensures the ability to use the high 5,000,000 exemption that may never be this high again. This is a good estate tax avoidance strategy for the giver -- the have substantially reduced their estate before the estate exemption drops and the estate tax rate jumps next year.