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I understand about the 14K gift allowance, and I understand

Customer Question
about the 5 million exemption...
I understand about the 14K gift allowance, and I understand about the 5 million exemption, so if gift taxes are not due until I give away over $5.25 million in my life time, why can't I give away as much as I want at any given time, and file a 709 @ tax time with the amount of overage I gave that year from the 14,000.00 per gift? thank you,[email protected]
Submitted: 4 years ago.Category: Tax
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7/14/2013
Tax Professional: Richard, Tax Attorney replied 4 years ago
Richard
Richard, Tax Attorney
Category: Tax
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Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.


Good afternoon. You can indeed give away any amounts at any time that you desire. During any calendar year, the first $14,000 for 2013 (or whatever the annual gift exclusion happens to be for any later applicable year) requires no reporting or tax because it is within the annual exclusion amount. Then, for any excess during a calendar year, you will need to file a Form 709 at the same time as filing your income tax for the prior year letting the IRS know how much was the excess that you gave during that calendar year so the IRS can keep track of how much of the lifetime exemption you've used.


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Customer reply replied 4 years ago
That was a simple answer to my question which I understood perfectly...thank you. But please answer this for me. As long as I do not go over the 5 million life time exemption then I do not have to pay any gift tax on the money I give away, but...if I do go over the 5 million, I pay gift tax on the amount that I am over? Am I correct here? And if this is true then why do people worry about having to pay gift tax on gifts if they know their lifetime exemption of 5 million $ could never be reduced to (0) because they don't have that kind of money to give away. I want to give away as much of my money to my children as possible while I am alive; I have already given both of them $30,000.00 each this year...so my 5 million is going to be reduced by $32,000.00 this year at tax time, but I still don't pay gift tax because my exemption is still above the (0) line, correct?
Tax Professional: Richard, Tax Attorney replied 4 years ago
You're welcome...it's my pleasure! That is correct...until you've made cumulative gifts over the annual gift exclusion in excess of $5,250,000, you will owe nothing. The gift tax return is only a reporting mechanism; no tax will be due. And, yes, if you gave them each $30,000, the excess $16,000 each will use up $32,000 of your lifetime exemption, but no tax will result. Most people worry about gift tax because they don't understand how the law works. :)
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Tax Professional: Richard, Tax Attorney replied 4 years ago
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