A Comparative Proposal to Reform the United States Gift Tax Annual Exclusion

By Kinsler, Jeffrey S. | Vanderbilt Journal of Transnational Law, November 1997 | Go to article overview

A Comparative Proposal to Reform the United States Gift Tax Annual Exclusion


Kinsler, Jeffrey S., Vanderbilt Journal of Transnational Law


TABLE OF CONTENTS

I. INTRODUCTION

A. The U.S. Gift Tax

B. The Role of the Annual Exclusion in Estate and Gift Tax

C. Annual Exclusion Abuse

D. Annual Exclusion Reform II. THE FEDERAL GIFT TAX

A. Imposition of Gift Tax

1. Incomplete Transfers

2. Business Transactions

3. Support

4. Gratuitous Services

B. Advantages and Disadvantages of Gifts

C. Net Gifts III. THE ANNUAL EXCLUSION

A. History of the Annual Exclusion

1. Split Gifts

2. Timing of Gifts

B. Purpose of the Annual Exclusion

C. Present and Future Interests

1. Identification of Donees

2. Indirect Gifts

3. Valuation

D. Application of the Annual Exclusion to Certain Interests

1. Interests in Income

a. Non-Income Producing Property

b. Contractual Interests

2. Gifts to Minors

a. Outright Gift

b. Demand Rights

c. Section 2503(c)

d. Uniform Gifts to Minors Act IV. THE OTHER GIFT TAX EXCLUSIONS, DEDUCTIONS, AND CREDITS

A. Section 2503(e)

B. Gift Tax Deductions

C. Miscellaneous Exclusions

D. The Unified Credit

E. Interest-Free Loans

F. Generation-Skipping Tax

G. Cumulative Effect of Gift Tax Exemptions V. THE NEED FOR ANNUAL EXCLUSION REFORM

A. Complexity

B. Practical Abuse

C. Inequity

D. Comparison with International Standards

1. New Zealand

2. The United Kingdom

3. Japan

4. The Netherlands

5. Summary of International Gift Tax Laws VI. ANNUAL EXCLUSION REFORM

A. Proposed Legislation

B. Impact of the Reform Proposal VII. CONCLUSION

[T]here is nothing sinister in so arranging one's affairs as

to keep taxes as low as possible. Everybody does so, rich or

poor and all do right for nobody owes any public duty to pay

more than the law demands . . .(1)

Judge Learned Hand (1947)

I. INTRODUCTION

Uniform transfer tax laws are essential to regional and global commerce. Without consistent tax laws, it is difficult, if not impossible, for and executives to arrange their financial affairs. As a practical matter, the lack of transfer tax consistency has led to the development of a new class of refugees: wealthy executives willing to relinquish their citizenship in exchange for advantageous tax laws.(2) This Article examines the principal exemption to U.S. gift tax laws and proposes legislation designed to harmonize the gift tax laws of the United States with those of other industrialized nations, particularly New Zealand, the United Kingdom, Japan, and the Netherlands.

A. The U.S. Gift Tax

United States citizens are not required to pay estate and gift taxes! In fact, the only people who should pay such taxes are those wishing to donate money to the U.S. government.(3) Everyone else is spared this burden bemuse transfer taxes am not compulsory.

By now many readers must be asking the obvious question: How many years in prison would one receive for claiming this tax free status? The answer, quite surprisingly, is zero, as it is entirely lawful to evade estate and gift taxes in the United States. Transfer tax(4) evasion is, in fact, authorized, nay, encouraged by the Internal Revenue Code (hereinafter I.R.C.) in a provision known as the gift tax "annual exclusion."(5)

Briefly stated, the annual exclusion is the single largest loophole in the transfer tax system, and it has, in effect, converted the U.S. comprehensive estate and gift tax scheme into a system of welfare for the wealthy. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

A Comparative Proposal to Reform the United States Gift Tax Annual Exclusion
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.