What constitutes a “gift” for the purpose of the estate and gift tax?
The IRS interprets a gift very broadly, so that a gift may include any transfer of property or assets, or the use of income-producing property, without expecting something of equivalent value in return. Even selling something to another may be considered a gift, when it is sold at less than full value. An interest-free or below-market loan may also create a gift for gift tax purposes.
Fortunately, taxpayers may make annual gifts to individuals without the gift incurring any gift tax liability, up to the annual gift tax exclusion amount. This amount can be doubled when the gift is split between spouses. Gifts made within the annual exclusion do not reduce the available lifetime credit under the estate and gift tax, and they can be made every year. Moreover, certain gifts, such as direct payments to qualified education institutions or health care providers, are not counted at all toward the gift tax, regardless of the amount. Preparing and filing a gift tax return will be required under certain circumstances.
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