Taxable Gifts: Pay Less to Uncle Sam

By Ditman, Scott; Lowenthal, Neil S. | The CPA Journal, January 1996 | Go to article overview

Taxable Gifts: Pay Less to Uncle Sam


Ditman, Scott, Lowenthal, Neil S., The CPA Journal


Most people want to minimize their current tax liability and defer the payment of taxes, thinking that the more taxes paid today, the less money they will have for tomorrow. Yet under our estate and gift tax system, deferring taxes, may not be the best strategy if the goal is to minimize what you give to the government and maximize what your heirs will ultimately receive.

By making lifetime taxable gifts in excess of the unified credit amount of $600,000, you can provide even more for your heirs. One reason is that any post-gift income or future appreciation related to the property transferred will not be subject to estate tax in the donor's estate. Another reason is that if the donor lives at least three years from the date of the gift, any gift tax paid is also removed from the estate, further reducing the amount subject to estate taxes. Since the Federal estate tax climbs to an imposing marginal rate of 55% on taxable estates over $3 million, making taxable gifts may significantly increase the amount left for your beneficiaries.

Make the Most of Tax-Free Gifts Before making taxable gifts, there are certain planning opportunities that should be fully exploited. One of the biggest tax breaks available is giving up to $10,000 a year to any number of individuals without the transfers being subject to gift tax-as long as the gifts are considered present interests. If the taxpayer's spouse joins in making the gifts, the break doubles to $20,000 per donee. So, if a married couple has a child who is married with three children, the couple could give away $100,000 a year ($20,000 per donee). Over 10 years, that would remove $1 million from the couple's estate. In addition, any post-gift income and appreciation related to the gifted assets would be removed from the estate and excluded from estate taxes.

An estate can be further reduced by paying the educational, or medical expenses of any individual. These gifts are not subject to the $10,000/$20,000 annual exclusion limitation, as long as the payments are made directly to the organization providing the service.

Gift and estate taxes are structured under one system. So, in addition to gifts covered by the annual exclusion, an individual can give away up to $600,000 either during his or her lifetime or at death without triggering Federal gift or estate tax.

The Advantages of Making Gifts in Excess of $600,000

By making gifts in excess of $600,000 during your lifetime, heirs can end up with even greater amounts after all taxes have been paid. …

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

Taxable Gifts: Pay Less to Uncle Sam
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

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

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.