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2006 Gift Tax

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Elizabeth Said:

How to avoid the estate/gift tax?

We Answered:

For 2006, one person can give another person $12000 without gift tax. That means your parents can give you $24000 without any gift tax. You don't have to pay income tax on the gift.


Zhicheng Lai

Enrolled Agent

Jerome Said:

My son died in 2006 & left $100k estate. I gave 1/2 to my son & his wife. Can I claim that as a gift?

We Answered:

No, you cannot deduct the gift for income tax purposes. To the contrary, I'm guessing that you probably did not file the required Gift Tax Form (IRS 709) return and that you now owe money to the IRS.

As of January 2006 continuing through 2007, the gift tax exclusion is $12,000 per year ($24,000 per married couple). This means the first $12,000 (or $24,000) of a gift is not taxable but the remainder is.

In your case, since you gave $50,000, you have an excess taxable gift of $38,000 ( or 26,000). The gift is not taxable to the recipient but is taxable to you as the person giving the gift. A Gift Form (IRS 709) must be filed with the IRS yearly, by April 15.

You have no "tax advantage" to claim on your returns. I recommend you get in touch with a CPA as soon as possible to calculate the taxes and any penalties you may owe.

Jeffrey Said:

Can I and my wife give our daughter more than $10,000 without her paying a gift tax?

We Answered:

For 2006, that amount went to $12,000 per "person-to-person" transaction. You could give your daughter $12,000 and your wife could give your daughter another $12,000. Nobody pays taxes.

Even if you gave more than this amount, you won't necessarily pay taxes. You would have to file a Form 709 "Gift Tax Return", but unless you gave over $1,000,000 in your lifetime, there would be no tax due. The recipient of a gift never pays tax.

Mabel Said:

What is the last date for a gift to count on 2006 taxes?

We Answered:

12/31

Leona Said:

How much money can i gift my children tax free in the year 2006?

We Answered:

Estate and Gift Tax
Generally, an estate tax return must be filed if the estate is more than the unified credit effective exclusion amount. This amount increases to $2,000,000 (from $1,500,000) for estates for tax-year 2006 through 2008, and increases to $3,500,000 for tax-year 2009. The amount remains $1,000,000 for gifts for tax-year 2006.

The estate and gift maximum marginal tax rates drop to 46% (from 47%). The rates drop to 45% by tax-year 2007.

The annual gift tax exclusion increases to $12,000 (from $11,000).

In 2010, the estate tax is repealed, as is the "stepped up" basis rule for inherited property.

Clayton Said:

Tax on Uniform Gift to Minor Account?

We Answered:

Income that accrues to a minor, such as income from a UGMA account, is taxed as follows in tax year 2006. Assuming the child has no other income and is under age 14, the first $750 of investment income falls into the child's zero bracket. The next $750 is taxed at 15%, and the rest is taxed at the parents' top bracket (marginal rate). The tax on a child's income imposed at the parents' top bracket is the so-called "kiddie tax." If the child is 14 or over, the parent's tax situation does not come into play at all. All the income is on the child's return and he or she is taxed as an entity unto himself/herself. Always check the Form 1040 instructions for the appropriate number to use for a given tax year. Also note that IRS regulations require all minors 14 or older to sign their own tax returns. Finally, please note that these tax rules are for earned and unearned income for a minor; there is no special tax treatment for UGMA accounts. Your Ad Here

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