Question

1. What are the tax and non-tax advantages or disadvantages of making a transfer by gift instead of at death? 2. Although there appear to be transfer tax advantages in making gifts, can all taxpayers take advantage of these tax savings? 3. If a husband and wife collectively own assets valued at $2.3 million with an aggregate basis of $400,000, what planning considerations should be taken into account to maximize overall tax savings under the federal gift, estate, and income tax systems? How about if the assets were worth $6.3 Million with an aggregate basis of $3.4 Million? 4. How will lifetime gifts affect any applicable state death taxation?

Answer 1

1. Tax Advantages of making a transfer by gift-

• Gift of upto the annual exclusion incur no tax or filing requirement.
• By splitting the gifts married couples can give upto twice the amount tax free.
• Gift in excess of annual exclusion may still be tax free upto the lifetime estate basic exclusion amount.

Non tax advantages of making a transfer by gift-

Following gifts are not taxable-

• The gift to a political organization for its use
• Gift to charity
• Gift to spouse
• Gift less than the annual exclusion

2. No, Taxpayer making the transfer as a gift up to the annual exclusion can only avail the exemption. However, the gift in excess of annual exclusion may still be tax-free up to the life estate's basic exclusion amount. such gift might result in an increase in estate tax.

4. The lifetime gift tax exemption is the total amount you can give away tax-free over the course of your entire lifetime. its collective cap rather than by person or by year and its in addition to the annual exclusion