Subject: Lifetime Exemption to Gift Tax Payment
I am considering giving a home worth $40,000.00 to a relative but do not want to pay gift tax on it. My accountant has told me that I can give it the whole home to this person in one calendar year only if I deduct it from my lifetime exemption from gift taxes. My attorney, on the other hand, has told me that I have to separate the gift into two parts and give one half of the home this year and one half next year regardless of whether or not I deduct it from my lifetime exemption. Which is correct?
2 Answers from Attorneys
Lifetime Exemption to Gift Tax Payment
Your accountant is correct. The home can be gifted in one tax year. You can take the 10,000 exclusion (20k if married). The other 30,000 (or 20k as the case may be) will reduce your lifetime exemption.
Any gift is permissible! (But ...)
I expect you misunderstood your attorney. You may give anything you want to anyone.
In some cases (e.g., over $600,000 value), youmight have to pay a tax as you do. In other cases, there is no tax but there is a tax implication, e.g., when it exceeds the $10,000 / $20,000 (if you'remarried) per donee (recipient) annual exclusion limit.
Your attorney may know that you will be leaving a large(over $600,000 ... maybe over a $1 million) estate and istherefore making the sensible recommendation that you spreadyour gift across two years. Or your atty may have determinedthat the relatively low cost of spreading the gift over twoyears is worthwhile just on the offchance that you might becomewealthy someday before you die and have a large estate ... you do buy lottery tickets, don't you?
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